The rally in H shares has also been fuelled in part by their limited supply. Most of the shares are closely held by fund managers. According to Hong Kong Exchanges and Clearing data, equity funds hold as much as 20 per cent of the float of H-share companies.

With H shares skyrocketing, now would seem an opportune time for Hong Kong-listed mainland companies to tap the market for additional funds.

'Higher share prices would help alleviate the dilution effect from the placement of additional shares ... thus lowering the cost of capital,' a corporate finance officer said.

Secondary placements would also help H shares such as materials companies to expand their production facilities.

'I understand some of the mainland basic materials companies are thinking of placing H shares,' a fund manager said. 'After the reporting season ... there will be more talk about placements [from controlling shareholders].'

Under Hong Kong listing rules company managers are not allowed to trade shares one month prior to a results announcement.

According to recent reports, Jiangxi Copper was considering a placement but market rumours yesterday indicated that the plan had been scrapped. Jiangxi shares dropped 1.6 per cent to $1.85 yesterday, extending a loss of 5.53 per cent on Monday.

Other H shares that may tap the market include Aluminium Corp of China (Chalco) - which has plans to expand its alumina production - and Anhui Conch Cement, which hopes to reduce its debt load.

A secondary placement for H-share companies is not easy. Just a handful - including Sinopec Shanghai Petrochemical, Guangdong Kelon, China Shipping, Yanzhou Coal and Huaneng Power - have made it to market with an additional offering, according to mainland corporate finance experts and accountants.

Companies must obtain approval from the China Securities Regulatory Commission (CSRC) and other shareholders on the mainland.

The process, in particular in dealing with CSRC, is difficult and time consuming, experts say.

H-share companies were mainland registered enterprises and about 50 per cent of the shareholdings were state-owned in the form of 'legal person shares', the corporate finance officer said.

The CSRC's main objective is to protect state-owned assets and obtain the best price for those assets during the placement process. H shares cannot be sold for less than book value.

In addition, the CSRC sets quotas for each class of share - A shares, B shares and legal person shares - which are determined when a company submits its listing application.

Any alteration to the quota would dilute the other share classes, which would be another consideration for the CSRC when it considered whether to approve a secondary H-share offering, the corporate finance officer said.

'It takes at least three months to go through the regulatory process,' he said.

But investors anxious to buy H shares now may not have the patience to wait. As a result, controlling shareholders of H-share companies might sell some of their own holdings to institutional investors and wait for additional shares to be placed after receiving the CSRC's approval.

Some industry players doubted whether controlling shareholders would be willing to part with their shares because they were at the mercy of the CSRC.

The fund manager said: 'The controlling shareholders would certainly 'test' the response of the CSRC before selling some of their stake.'