After year-long break, first wave of China IPOs to draw keen interest

The two mainland companies that will kick off a new season of initial public offerings in the country are set to attract strong investor interest, a good omen for dozens of others lined up to tap stock markets this month after a year-long hiatus.

Signs of strong appetite were already in evidence during the book-building process, which analysts credited with reforms to the way new issues are priced on the mainland.

Guangdong Xinbao Electrical Appliances and Zhejiang Wolwo Bio-Pharmaceutical, the first two companies to publish offer price targets for planned listings in Shenzhen, were required by the new rules to discard the highest bids.

IFR, a Thomson Reuters publication, reported on Wednesday that Guangdong Xinbao had been forced to toss out all orders over 10.52 yuan (HK$13.36) per share, which had accounted for 44.5 per cent of the total subscription volume.

Regulators hope this new practice, combined with daily limits on price increases for new issues, will help prevent the sort of distorted pricing that caused many new listings to open to triumphant rallies, only to quickly fall below the offer price and languish there.

Economists have expressed concern that without fresh funds in the market, the looming flood of new listings may dilute overall valuations.