Mainland stock market eyes huge IPOs

CHINA / National

Mainland stock market eyes huge IPOs

By Zhang Ran (China Daily)
Updated: 2007-07-25 06:52

The mainland stock market will become one of the world's most attractive
financial centers this year in terms of new share issues, or initial
public offerings (IPOs), financial analysts have said.

In the second half of the year, in particular, the Chinese mainland stock
market (combining the exchanges in Shanghai and Shenzhen) is expected to
raise 1.1 trillion yuan ($144 billion) - an eight-fold increase over the
first half.

According to Bloomberg, the 44 IPOs in the A-share market raised 124
billion yuan ($16.5 billion) in the first half, compared with 106 IPOs on
the New York Stock Exchange Group (merged with Euronext), which raised
$46 billion.

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In a breakdown by category, companies registered and listed overseas, or
red-chips, and mainland-based firms listed overseas, or H-shares, are
likely to absorb 250 billion yuan ($33 billion) once they issue A shares
to domestic investors, according to Zhang Gang, an analyst with Southwest
Securities.

The continuing restructuring of shareholding in State-owned enterprises
will generate demand for 426.4 billion yuan ($56 billion) once the reform
is completed this year.

Other Chinese companies are expected to raise another 419.5 billion yuan
($55 billion) on the A-share market.

So they "represent a demand for large amount of money in the A-share
market," said Zhang Qi from Haitong Securities.

"The regulators will have to watch the market closely. If liquidity does
not look good, IPOs may be postponed."

However, She Minhua, an analyst with Beijing-based CITIC China
Securities, believes the A-share market will be awash with liquidity in
the second half despite the recent central bank move to hike the interest
rate and the government decision to cut the tax on interest income from
20 percent to 5 percent.

"The real deposit interest rate is still in negative territory,
considering June's CPI rise to 4.4 percent. Bank deposits may absorb part
of the liquidity from the stock market, but not that much," he said.

Among the largest companies that are likely to offer domestic IPOs are
China Coal Energy, PetroChina, and some red-chips listed in Hong Kong.

China Coal Energy Co Ltd, the nation's second-largest coal producer by
sales, was the most recent H-share company to announce its domestic
listing plan. In a statement to the Hong Kong stock exchange on July 16,
it said it planned to issue 1.5 billion yuan ($197 million) worth of
shares on the Shanghai Stock Exchange.

PetroChina, a subsidiary of China's largest oil producer China National
Petroleum Corporation (CNPC), announced in early June that it will issue
up to 4 billion yuan ($526 million) worth of shares in Shanghai.

According to the Hong Kong stock exchange, by the end of May, 22 of the
93 red chip companies met the requirements to list in the mainland.

The A-share market has seen IPOs surge since earlier this month.
According to Shanghai-based Wind Data, six companies have launched IPOs
this month, raising 18 billion yuan ($2.4 billion), equal to the amount
raised in the previous two months.

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