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.' Beijing suspended listings in September last year to boost the weak market. Last week, the CSRC said the nine-month ban was lifted, unveiling revised listing rules under which retail investors are given a better chance to win lucrative new shares. The Shanghai Composite Index has jumped 54.33 per cent so far this year, buoyed by speculative capital, though some analysts predict a correction is looming. Thirty-three companies had received approval to sell new shares before the suspension. Among them, China State Construction is expected to raise more than 40 billion yuan (HK$45.2 billion) by floating 12 billion shares, while Everbright seeks 11.5 billion yuan in proceeds. Analysts said the listings would spark a subscription spree, because highly profitable new shares are always the darlings of mainland investors. New offerings normally surge on the first trading day, since the shares are priced artificially low to facilitate fund-raising by the state-owned company. Under the new mechanism, institutional investors can bid for new shares through either online or offline systems, a move to restrict them from obtaining too many flotation shares. Analysts said retail investors would dump a huge number of existing shares on the market to reserve cash for the new share offers. According to their statements earlier, Guilin Sanjin plans to offer 46 million shares, expecting to net 630 million yuan, while Zhejiang Wanma intends to float 50 million shares to raise 340 million yuan.