Ten Chinese companies have unveiled initial public offering plans for a total Rmb5.1 billion ($840 million), kicking off a new round of IPOs after a four-month overhaul.
The ten, including Guangdong Ellington Electronics Technology and Yunnan Hongxiang Yixintang Pharmaceutical, will begin the offering process as soon as June 11 and aim to complete listing by this month.
Five of the companies plan to IPO on the Shanghai Stock Exchange, while the other five are targeting Shenzhen on its small-and-middle enterprise board and the growth enterprise market.
The ten companies are the first batch to tap the A-share IPO market since 43 groups listed in January, raising a total of $3 billion. The regulator then deliberately controlled the pace of approvals to reduced the pressure on the secondary market, which was seeing large selling by investors to fund IPO share purchases.
Bankers and investors have generally welcomed the reopening of the market. “It’s depressing for issuers to have waited such a long time without knowing when the market will open. And of course our business stuck too,” complained a Beijing-based investment banker on the earlier market halt.
The Shanghai Composite Index rose 1.08% on Tuesday, the biggest single-day increase in the past month.
Some investors expressed concerns towards the domestic IPO market. The market historically has a high valuation, mainly caused by limited supply, and the phenomenon may remain.
“I feel the market is not healthy, although we did benefit and make money from the high valuation. Once the valuation drops in the secondary market, investor sentiment and demand will be dented,” said a manager with a mid-sized fund firm.
The average price-to-earnings ratio of the A-share IPOs rose to 28.82 times, compared with 6 times in Hong Kong as of January, according to a report by data provider ChinaScope.
Investors also believe that the regulator’s general interference in the market has kept a lid on IPO activities and market development.
China’s A-share IPO market, the largest in the world in terms of IPO fundraising size during 2009 to 2011, was stopped for more than 18 months until January to conduct clean-up reforms. The market has been closed again since February.
Xiao Gang, chairman of the China Securities Regulatory Commission, last month said only 100 companies would be allowed to list in the A-share market by year-end. In this case, those issuers who are waiting in line or who are making listing plans have to wait for an even longer time.
There are 616 issuers waiting in the existing pipeline for listings.
The CSRC also has tweaked the listing rules which were issued in last November and tried out for a month in January. However, banking sources said no major changes have been made yet.
