The China Securities Regulatory Commission will pick several small-cap companies to spearhead the resumption of initial public offerings on the mainland after a nine-month hiatus, a modest start intended to avert a huge liquidity drain on the volatile market.
According to sources close to the CSRC, the regulator is set to approve the first batch of listings at the weekend, with a kick-off of new share sales before June 25.
Among the top candidates, Guilin Sanjin Pharmaceutical Group and Zhejiang Wanma Cable edged closer to launching small offerings on the SME board of the Shenzhen Stock Exchange with their underwriters awaiting official nod from the regulator, sources said.
The decision underscores the CSRC's fears of a sharp fall in the market, which may not be able to digest large flotations by companies such as Everbright Securities and China State Construction Engineering.
The regulator planned to allow either Everbright or China State Construction to pioneer the renewed float of initial public offer shares, since it would give the huge state-owned companies much-needed funds for expansion.
But it made a U-turn because of concerns of a hefty drop on the Shanghai and Shenzhen bourses.
'The CSRC is still in a dilemma,' said Citic Securities analyst Sun Chao. 'It may still want to use small IPOs to test the market in order to minimise the damage to the existing holdings.'