Next round of IPOs could reinvigorate markets

By Louise Ho Source:Global Times Published: 2014-4-23 21:18:01

Illustration: Lu Ting/GT



Over the past week, the China Securities Regulatory Commission (CSRC) has posted listing prospectuses from 65 companies on its official website. Although the securities regulator has not announced when or whether it will approve any of these listing proposals, this move sends a strong signal that authorities will soon resume IPO reviews, with new public listings likely to follow afterward.

The CSRC's decision to release these prospectuses - which were published in three different batches starting Friday night - came as something of a shock to Chinese market participants. The move kindled expectations that a fresh crop of IPOs will soon land on local bourses, as this marks the first release of preliminary information disclosures from pre-listed companies since October 2012. Such disclosures usually lead quickly to final listing approvals from authorities, prompting analysts to speculate that new IPOs might hit the market as early as May.

Despite some initial misgivings from investors, the mainland's next likely group of IPOs could prove helpful in getting local bourses back on track amid wider efforts to liberalize the mainland's securities market.

Among the 65 companies mentioned above, perhaps the most closely watched is Wanda Cinema Line Co, owned by the mainland's richest man Wang Jianlin, chairman of Dalian Wanda Group. With 2013 net profits equaling about 600 million yuan ($96.1 million), Wanda Cinema Line is the mainland's largest cinema group in terms of box office receipts. According to its IPO documents, the company hopes to raise some 2 billion yuan from its planned listing, with the majority of the funds earmarked for the construction of theaters.

But Wanda Cinema Line isn't the only tentative movie-related IPO that has attracted notice. Shanghai Film Corporation intends to raise 969 million yuan, with the money to go toward the opening of new theaters and digitizing its cinema network operating system.

Apart from the movie industry, four securities firms were also among the listing hopefuls, including Huaan, Guotai Junan, Dongxing and Orient securities.

When the CSRC resumed IPOs in January following a 14-month moratorium, a total of 48 companies were cleared to list on the Shanghai and Shenzhen stock exchanges. After this though, authorities again drew the curtain on new offerings in March, prompting speculation that another IPO freeze had begun. At that time, more than 600 companies were backed up in the listing queue.

Over recent months, not all investors have welcomed reports hinting at the resumption of IPOs. The benchmark Shanghai Composite Index plunged 1.52 percent Monday, the first day of trading after the CSRC published its preliminary disclosures Friday night. The securities sector was particularly hard hit, falling almost 3 percent on the day. As in previous instances when the return of IPOs appeared imminent, investors feared that a flood of new offerings would deplete liquidity in the already crowded equity market.

With time though, investors should gradually warm to the idea that new IPOs are inevitable with broader efforts by the CSRC to revive the country's ailing stock market. In its latest maneuver aimed at increasing market efficiency, regulators streamlined the preliminary IPO review process. Specifically, primary reviews will now be done after information disclosures, a spokesperson from the CSRC announced Friday. This was widely interpreted as a major stride toward implementing reforms aimed at displacing the old approval-based IPO protocol with a simpler registration-based system.

All of this comes as the Shanghai Stock Exchange - currently home to many large, State-owned enterprises - continues to lose favor with investors. The bourse has experienced a trading volume decline over recent months as investors gravitate toward its sister exchange in Shenzhen, where many of the country's smaller private enterprises are traded. With quite a number of the 65 companies identified by the CSRC plotting to list in Shanghai, their arrival may help reignite interest in the city's flagging exchange.

Of course, these moves are also likely to compliment another supportive policy rolled out by authorities earlier this month, a cross-market pilot program that will allow mainland and Hong Kong investors to buy shares listed in both Shanghai and Hong Kong. The so-called "Shanghai-Hong Kong through-train"program is expected to start within the next six months.

The author is an editor with the Global Times.

bizopinion@globaltimes.com.cn

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