IN what was described as a 'crash placing', 400 million H shares in mainland textile producer Yizheng Chemical Fibre, worth nearly $1 billion, were put up for sale yesterday by British investment bank SG Warburg. The bank reported heavy demand for the stock, which was priced at $2.45, a 2.7 per cent discount to the $2.52 price prevailing at the time the shares started to move out of Warburg. The market was surprised by the speed of the sale of $980 million worth of stock in the group, the issue being launched within hours of being given permission by the Chinese authorities. Yizheng shares strengthened from an afternoon opening of $2.50 to close at $2.525 after news of the deal emerged, although this was still a day-on-day fall of 2.5 cents. The issue of new shares puts a stock market value of $3.57 billion on Yizheng, which compares with the $3.8 billion of top ranked H share company Shanghai Petrochemical. The placing method adopted by Warburg was the first of its kind involving an H share, according to the bank, and resembled the more common bought deal, in which an investment house takes a large line of existing stock on to its own books, effectively absorbing all the market risk, and then rapidly pushes the shares out to clients. In Yizheng's case, Warburg took the strain on newly issued shares. Warburg said that the placing had been approved by both the China Securities Regulatory Commission and the Hong Kong stock exchange, indicating a new sophistication and flexibility among Chinese authorities in their approach to fund raising by state-controlled companies. The expected issue of further H shares in Yizheng sparked controversy earlier this year, with some fund managers concerned at the resulting dilution of their own holdings. The proposal to issue 400 million new shares 'within six months' gained overwhelming shareholder approval last week when it was put to the vote. Yesterday's issue is seen as a direct substitute for an earlier planned issue of domestic A shares on the mainland, which was expected to go towards reducing the company's debts. The crackdown on new issues by the Chinese securities authorities led to the change in plans. The go-ahead for the Yizheng placing, and its success, could mean that other H share companies would consider similar tactics. The pricing of the issue reflects a growing realisation among Chinese companies that double-digit price earnings ratios are not in line with today's market conditions. Warburg analyst Nick Moakes said that the placing price represented eight times 1995 earnings, and just 6.8 times prospective 1996 earnings. Yizheng, China's largest polyester manufacturer and the world's fifth biggest, is enjoying a boom in demand, soaring output and firm prices. This translated into a bumper 1995 and, at the beginning of this month, the company kicked off the H share results season by announcing a 64 per cent rise in net profits.