A worker at the site of future Walt Disney Co theme park in Shanghai. [Photo / Bloomberg]

SHANGHAI - Shanghai Construction Group Co Ltd on Thursday suspended trading of its A shares in Shanghai to avoid large fluctuations in its share price, as its parent company Shanghai Construction General Co has begun talks with the local government on asset reorganization within the company.

In a statement released to the Shanghai Stock Exchange, the Shanghai government-controlled company said its board will discuss asset reorganization and the suspension could be extended to Feb 21 if a plan were not made in 30 days.

Progress on the reorganization will be disclosed on a weekly basis to the Shanghai Stock Exchange, said an official with the company's securities department, who refused to be named.

The announcement comes just a day after the company won a 635 million yuan ($96 million) contract from Shanghai Shendi Group, which was created specifically by the Shanghai government for the development of a planned Disneyland theme park in the city.

Construction of the theme park started in November and local media say the total investment could top 100 billion yuan.

Shanghai Construction Group is contracted to do surface cleaning and site formation work on an area of 1.68 square kilometers in Chuansha, Pudong New Area, where the Disney project is located.

The securities department official said there was no connection between the contract and the share-trading suspension.

"The suspension is solely due to asset reorganization, which falls into the background of Shanghai's State-owned assets restructuring, and has nothing to do with the contract," the official said.

The restructuring of State-owned enterprises (SOE) in Shanghai has been gaining traction after the municipal government issued guidelines in 2008 to improve efficiency and eliminate overlaps in redundant business units among SOEs in the city.

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The Shanghai Construction Group's planned asset reorganization follows a private placement in May 2010, when the company issued 323 million shares to its parent company to buy shares in 12 companies and nine properties.

Shanghai Jahwa United Co, another listed SOE in Shanghai, is also a under trading suspension after the company said it was undergoing a restructuring plan.

It is estimated that more than a quarter of the 72 companies owned or indirectly controlled by the Shanghai municipality completed restructuring in 2009.

Yang Guoxing, director of the Shanghai Municipal State-owned Assets Supervision and Administration Commission, said in a Jan 13 meeting that the city plans to raise the securitization rate of local SOEs to 35 percent in 2011 from 30.5 percent at the end of 2010.

In a separate statement to the Shanghai Stock Exchange on Thursday, Shanghai Construction Group said its net profit in 2010 likely doubled from a year earlier, getting a boost from the private placement deal in 2010. The company's net profit in 2009 was 359 million yuan.