By Jin Jing (China Daily)
Updated: 2008-03-01 10:13

Shares in Fuyao Group Glass Industries Co, China's largest automotive glassmaker, surged 5.59 percent on Friday after it scrapped a share issue plan.

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Fujian-based Fuyao told the Shanghai Stock Exchange it will cancel the issue after minority shareholders expressed disapproval due to the current market climate. It also canceled a March 18 shareholder meeting to vote on the plan, the company said.

Fuyao said on Tuesday that it planned to raise 3.1 billion yuan ($435.61 million) by issuing 200 million shares to help finance eight projects, expand production capacity and upgrade a glass research center. Shares in Fuyao plunged a total 11.3 percent in two consecutive days after the share issue was announced.

"The expected negative impact on the company's image and stock price was the major reason Fuyao canceled the plan," Yu Bing, an analyst at Ping An Securities, said.

Analysts said scrapping the share issue plan wouldn't change the company's growth potential because it has several other fund-raising channels, including capital reserves, bank loans and market financing.

"But the share issue plan is expected to be raised again in the future when market conditions become suitable. Fund-raising is essential for the projects," Yu said.

Fuyao is the first company to cancel a new share issue plan after the China Securities Regulatory Commission said it will tighten supervision of new share issues by listed companies.

Large State-owned companies including Ping An Insurance and Shanghai Pudong Development Bank (SPDB) are also planning large share issues.

Anticipation of the share issues, which are expected to squeeze market liquidity, have dampened investor sentiment.

SPDB reduced its share sale target on Wednesday to 25 billion yuan from the previously indicated 40 billion yuan.

Fuyao Group's net profit rose by 49.39 percent to 917.21 million yuan last year on 2006.