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Second market readies for public offers

By Xu Shenglan (China Daily)
Updated: 2009-02-19 07:53

China's securities regulator is likely to allow initial public offerings (IPO) to be launched on the second board, according to industry experts.

Related readings:  China's IPO capital drops about 80%  Regulator mulls reforming IPO mechanism  CSRC shortlists '840 in US' for jobs

The regulator's green signal is likely to spur an IPO market that has been dormant for over five months now.

According to a source close to the China Securities Regulatory Commission (CSRC), the regulator has asked companies who had received permission for IPOs last year to submit their annual reports for possible floats this year.

The floats of 36 companies, amounting to 1.84 billion shares, has been delayed indefinitely, data from research firm Wind showed.

An investment banker said capital markets would see the re-entry of IPOs in the second quarter.

"In all probability, the first IPOs would be from the small and medium enterprises sector," said Cai Dagui, researcher, Ping An Securities. "Blue-chip IPOs like China State Construction Engineering Corporation and Agricultural Bank of China will test the waters only when the markets are stable."

"A second board would directly open financing channels for smaller firms that are in need of new capital," said Qian Laizhi, analyst, Cinda Securities.

Private equity fund manager Wu Guoping said the second board should be set up when capital supply is still abundant.

According to ChinaVenture, only one mainland company, China Singyes Solar Technologies Holdings, went public in the Hong Kong market this January, raising a total of $8.12 million.

Brokers have also called for a change in listing norms. "The major problem with the current mechanism is price manipulation," said Qian.

China's new share issuance system should be connected with the international markets, said Wu.

Galaxy Securities' researcher Liu Yiming said the new issuance system would also help in weeding out bad firms. "If a badly-managed company issues an IPO only to raise money, it will be driven away from the market under the new regulations," Liu said.