THE 400 million yuan rights issue planned by the Shenzhen China Bicycle Co has been scrapped because of poor conditions on the local exchange, where it was listed. The decision by the company - reckoned to be the biggest bicycle maker in the world - marks the first time that a company with a B listing has given up plans to issue more shares, although Shanghai Vacuum recently postponed a planned issue. Given the current stock market conditions in Shenzhen, where liquidity has dried up, trading has virtually stopped, and the index has been drifting, analysts welcomed the decision by Shenzhen China Bicycle. Now stock-based fund-raising exercises planned by other mainland companies may also be reviewed. In April a $474 million B-share primary issue by Shenzhen Vanke flopped, with only around half the available shares being taken up, and when trading started last Friday, the price opened at close to a 10 per cent discount to the offer. Shenzhen China Bicycle's one-for-five rights issue had been approved by shareholders at its annual general meeting in April, and had been expected to take place in the first half of the year. The subscription price was 10 yuan per share, against the stock's closing price of 20 yuan per A share and US$1.24 per B share. ''In view of the latest market situation, we've decided to shelve the issue till at least after this year,'' said Shenzhen China Bicycle vice-president (finance) Rochester Co Man-kwong. ''We have no idea when it will be carried out. That will depend on market performance,'' Mr Co admitted. SBCI Finance Asia associate director Lawrence Ang Siu-lun said the move was wise given the prevailing market sentiments. ''There's no surprise at all. A few mainland stocks which have planned rights issues are now also thinking twice whether to really go ahead,'' said Mr Ang. ''Their financial advisers may oppose a rights issue at a time when they think the market can't absorb it,'' he remarked. The difficulty would be especially acute for the bicycle maker which, unlike most mainland stocks, had the majority of its stake in the B share market. It has issued 80.5 million A shares and 124.4 million B shares. The A share market, however, were also unlikely to achieve a considerable subscription level. The bicycle maker's former rights issue plan had been to raise 400 million yuan (about HK$535 million at the official rate) for expanding production facilities, strengthening its mainland distribution networks, buying raw materials and investing in hotels, shopping centres and other properties. Mr Co said the decision to scrap the cash call was also made considering the company's improved financial position after placement of shares formerly held by the Schwinn Bicycle Co. Shenzhen China Bicycle, presently undergoing a restructuring exercise, was formerly owned about 23.7 per cent by each of its three major shareholders - Shenzhen Municipal Light Industry of China, Hongkong (Link) of Hongkong, and Schwinn Bicycle Co of theUnited States. The restructuring, which will finally bring the stake of Hongkong (Link) to 32 per cent and an end to Schwinn's shareholding, involves disposing the US shareholder's shares through placements.