More than US$722 billion of Chinese stocks are to be unlocked for sale next year, in a market where valuations are at a five-year high.
That would be the largest amount since at least 2011, according to China Merchants Securities Co (招商證券).
It is also equivalent to about 7 percent of the value of the entire Chinese equity market, data compiled by Bloomberg showed.
From initial public offerings to additional placements, China’s cash-hungry companies have been encouraged by Beijing to raise funds by selling new shares.
There has also been a rush of sales by firms looking to avoid turmoil in the nation’s debt market.
As a result, the number of restricted shares held by major shareholders, senior executives and early investors is swelling, driven by Beijing’s market reforms and looser regulations.
Shanghai’s Star market, which is to see high volume of new stock unlocks next year, has led declines in Chinese equities.
A gauge tracking it yesterday closed down 2.4 percent to the lowest in more than six weeks.
“More companies are going to issue shares to raise funds, especially after the rising default problems in the credit market,” Capital Securities Corp (群益證券) analyst Amy Lin (林靜華) said. “That means more restricted shares being unlocked in the future, which will be an issue affecting the market for a long time.”
In China, restricted stocks usually have a lockup period of anything between six months and three years after the date of listing.
When unleashed for company insiders to sell, the rest of the market can feel the effects.
Next year would see a concentration of unlocks in the second and third quarters, Industrial Securities Co (興業證券) said in a research note.
Companies in electronics, medicine and biotechnology, and brokerage industries face the highest value of unlocks next year, China International Capital Corp (中國國際金融) said.
The five companies facing the largest amount of unlocks next year are Contemporary Amperex Technology Co (時代新能源科技), Shenzhen Mindray Bio-Medical Electronics Co (邁瑞生物醫療電子), Foxconn Industrial Internet Co (富士康工業互聯網), CSC Financial Co (中信建投證券) and People’s Insurance Co Group of China Ltd (中國人民保險集團), with at least 198 billion yuan of shares to be unlocked each, China International Capital said.
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