Sunshine Media cleared for IPO

Guangdong China Sunshine Media has received approval from the securities regulator to float its shares on the Shanghai Stock Exchange, becoming the mainland's first company traded on the over-the-counter market to go public.

The firm, a subsidiary of Guangzhou Daily, a prominent mainland newspaper, handles advertising, printing and newspaper sales. It will make an initial public offering of 70 million shares and use the proceeds to fund 375 million yuan worth of expansion projects.

Sunshine Media closed at 20.90 yuan on the OTC market last Wednesday before it suspended trading to go through the regulatory review. It said it would place 50 million shares to existing stakeholders and the remaining 20 million to individual investors.

It has not set a price range for the offering and will not start price consultations until it receives another approval from the China Securities Regulatory Commission for that purpose.

The stock offer may bode well for companies traded on the country's OTC market - originally set for delisted firms - as the watchdog widens access for cash-hungry firms to stock funds, analysts said.

'The market is flush with funds,' said China Citic Securities analyst Cheng Weiqing. 'Regulators have reason to speed up share sales.'

Mainland companies raised a combined 225 billion yuan on the stock market last year after the share-sale ban was lifted in May. The bull run continued to the first half this year with 300 billion yuan being raised in the market.

Gui Minjie, vice-chairman of the CSRC, early last month said that an additional 200 billion yuan worth of shares would be sold on the mainland exchanges in the second half.

Analysts said regulators also hoped to slow the index growth by increasing supply of new shares. Yesterday, the benchmark Shanghai Composite Index rewrote records for the third day running, closing 0.68 per cent higher at 4,471.03 points.

The mainland set up the OTC market in July 2001 to accommodate companies expelled from the Shanghai and Shenzhen exchanges.

Some firms previously traded on the Securities Trading Automated Quotations network and National Electronic Trading (NET) system were also moved to the new trading system, also known as the country's third-board market.

The Shenzhen exchange's technology board is known as the second-board on the mainland, though it is still at a rudimentary stage.

Last year, regulators allowed start-up firms to trade on the OTC market in an apparent move to help them raise funds. Sunshine Media traded on the NET before the OTC market was set up.

To date, 14 stocks trade on the third board, including failed and delisted companies from the main board such as Shanghai Narcissus Electric Appliance, Guangdong Kingman Group and Shenzhen Zhonghao Group.

'Chances are slim for those delisted firms to return to the main board,' said Shanghai Securities Consulting analyst Wu Kan. 'But quality firms like Sunshine Media will have their day in the sun now that the regulators are speeding up initial offerings.'