Shares started trading in six newly listed companies in China on Wednesday after a five-month hiatus for initial public offerings (IPO) and just weeks before rules governing investors in new listings are set to change.
Shares in all the companies surged by their daily limit of 44 percent, a typical increase for listings in China.
The companies had filed to go public between February and June, but the Chinese government had banned new share sales in July in an effort to stem a plunge in the markets. The move created a backlog of nearly 700 companies that have been waiting to make their debuts.
About 3.98 trillion yuan (US$606 billion) was locked up for initial public offerings in June, while 42 billion yuan was actually raised, according to ANZ Research.
However, the China Securities Regulatory Commission on Wednesday said the deposit requirement for initial public offerings would be different next year. That might make more funds available for investing in new listings, and stocks in general, analysts said.
Chinese shares ended lower yesterday, giving up modest gains even after regulators reassured investors that reforms to company listings would not open a floodgate of new offerings.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen on Wednesday fell 0.4 percent, to 3,623.08, while the Shanghai Composite Index lost 0.5 percent, to 3,455.50 points.
Changing the rules could make new listings more inviting, ANZ Research rates strategist David Qu (曲天石) said.
However, the old requirements apply to the companies that started trading on Wednesday and the other 22 expected to list before the end of the year. Nonetheless, Qu said there is little to worry about.
“The PBOC [People’s Bank of China] is definitely going to maintain accommodative liquidity in the market in spite of the IPOs,” he said. “They will inject liquidity when necessary, so I am not worried about the IPO tightening this year.”
HSBC equities strategist Herald van der Linde said the government was working hard to make the process of going public more efficient. He added that it would take a while to see how the market responded to the resumption of public offerings.
“Sometimes when equity markets are hot, you see them do phenomenally well,” he said, referring to new listings. “I do not really expect that at the moment; you get that when there is liquidity. It will be much more muted from what we have seen for some of the past.”
In an apparent move to ease investors’ concerns, China’s securities regulator said that the reform would be a “gradual” process, and the IPO floodgate would not be opened all of a sudden. However, analysts said that market sentiment is fragile, due to sluggishness in the economy and ahead of a likely US Federal Reserve rate hike next week.
Anji Foodstuff Co (安記食品), a condiment maker; BanBao (邦寶積木), a toy manufacturer; and Bomin Electronics Co (博敏企業), which makes printed circuit boards, were listed on the Shanghai stock exchange. The Shenzhen listings were Hubei Kailong Chemical Group Co (湖北凱龍化工集團), which makes explosives; Zhejiang Zhongjian Technology Co (浙江中堅科技), which makes gardening machinery; and Beijing Sanfo Outdoor Products (北京三夫戶外用品), a manufacturer of camping items.
Additional reporting by Reuters
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