Mainland regulator approves 11 IPOs

PUBLISHED : Wednesday, 20 August, 2014, 9:21am
UPDATED : Thursday, 21 August, 2014, 12:28am

The mainland's securities regulator has given 11 companies the go-ahead to launch their initial public offerings on the Shanghai and Shenzhen stock exchanges, a move expected to drag down the market because of strong investor interest in newly listed shares.

The China Securities Regulatory Commission announced on Tuesday that companies that had passed pre-listing scrutiny could start book-building and trading after consulting the exchanges on their listing dates.

The approvals take the number of pending and launched initial share sales since June to 33, a third of the 100 quota set by the CSRC for the second half of this year.

Five companies will list in Shanghai while the other six will float in Shenzhen - five on the Nasdaq-style ChiNext market and one on the small and medium-sized enterprises board.

"These companies are lucky since they will be able to obtain long-coveted funds, while the shareholders will get rich," said Cao Hua, a manager with private equity funds operator Tripod Capital. "However, it is far from enough to quench mainland firms' demand for financing."

Beijing resumed processing applications for initial public offerings at the beginning of this year following a 15-month hiatus in a move designed to create a financing alternative to bank loans as the leadership seeks to curb the build-up of bad loans and rein in a rampant shadow banking system.

The CSRC suspended new listings in October 2012 in an attempt to bolster interest in stock trading after the Shanghai market became one of the world's worst performers. The market is up 5.87 per cent so far this year.

With the State Council determined to deleverage an economy facing increasing financial risks by tightening monetary policies, the reopening of the listing market was seen as a step Beijing needed to take to support cash-hungry firms.

But the stock market's lacklustre performance in the first half of this year deterred CSRC chairman Xiao Gang from fast-tracking listing approvals for fear of triggering a sharp fall on the market.

About 600 listing applicants are awaiting approval from the CSRC.

The 11 approved offerings are expected to depress the market, as retail investors are likely to focus on the newcomers to chase first-day gains.

Nearly all recent share offerings have seen their prices rise the first-day trading limit of 44 per cent, as investors shunned existing stocks to speculate on the newcomers.

The CSRC has approved mainly smaller listings this year to avoid massive fundraising deals that could drain huge amounts of liquidity from the market.