The first sign that the hiatus, which began last May so the 1,300 listed firms could convert state-held non-tradable shares into tradable ones, was about to end came towards the end of April. The China Securities and Regulatory Commission (CSRC) announced a rough schedule for the resumption of listings, starting with private placements of stock, as well as introducing a more market-oriented pricing system for share offerings. It also launched measures designed to encourage corporate bond sales and dividend payments.
Further CSRC announcements were issued during the May holiday period. The regulator said IPOs would resume once the market was ready, giving no timetable but publishing a number of rules relating to the re-launch. Companies looking to offer shares must have a three-year record of profitability with revenues of more than US$37 million over that time.
This was followed by news that secondary issues of stock, convertible bonds and other securities were ready to return as part of a step-by-step process culminating in IPOs. Having already risen 24% in 2006, a vast improvement on the slump that characterized the previous year, the Shanghai Composite Index rose 56.88 points to 1497.10, its highest closing price since June 7, 2004.
Analysts expect the first IPOs as early as this month. However, they warned that measures to rein in economic growth may limit the size of the bull market created by the re-launch. Meanwhile, a rush to invest in IPOs once they resume could create liquidity problems. But there's little doubt the arrival of strong companies onto the domestic bourse will have a positive impact. Among the likely entrants is Bank of China, which has been approved to raise up to US$2.5 billion in a domestic IPO, the South China Morning Post reported.
The bank's stock was due to begin trading in Hong Kong on June 1, the IPO proving hugely popular among institutional investors. The 95% of the shares earmarked for these investors was covered within hours of opening, with orders reaching at least US$9.37 billion on the first day alone. Bank of China was expected to float at 1.89 to 2.17 times its book value.
China IPOs lead the world
The strength of initial public offerings by Chinese companies in Hong Kong has driven Greater China's average IPO levels past those of the US and Europe, according to PricewaterhouseCoopers. The average amount raised by offerings in Hong Kong, Shanghai, Shenzhen and Taipei reached US$260 million last year, up from US$83 million in 2004, while the average offering for the New York Stock Exchange and NASDAQ came to US$170 million, a 22% fall on 2004. European IPOs were worth US$100 million, up 11% year-on-year.
Intraday trading set for debut
Investors will be able to buy and sell a stock on the same day, which could lead to an increase in activity on domestic bourses. From July 1, A-shares will no longer have to be placed in an investor account for a day before being traded on the Shanghai and Shenzhen exchanges. Introducing intraday trading should allay fears about the risk of holding stock overnight, as well as bringing the stock exchanges in line with global practice.
Japan wants China listings
Ten Chinese companies could list in Japan according to the chairman of the Tokyo Stock Exchange (TSE), the Financial Times reported. Taizo Nishimuro said that by listing in Tokyo, the Chinese companies could take advantage of "the abundant flow of money" into financial assets taking place in the country. The TSE is trying to regain credibility lost through a string of recent problems, which culminated in the forced closure of the exchange in January. Attracting foreign companies has been deemed part of this reinvention process.
ICBC looks for higher value
Industrial and Commercial Bank of China (ICBC) suggested limiting the amount of shares in its US$10 billion-plus IPO later this year as it chases a higher valuation, the South China Morning Post reported. A preliminary listing plan from the mainland's largest commercial lender said 50% of the IPO should be new shares, with the rest sold from the bank's two government shareholders. ICBC hopes to boost its return on equity, with a target of 13.8% set for this year. China Construction Bank reported 21.59% return on equity last year.
Copper debts finally settled
The government has settled most of the wrong-way bets on copper futures made late last year, Bloomberg reported, citing Yang Yinghui, head of metals trading at Cofco Futures. The losing trades were made by state reserve trader Liu Qibing, who sold short on as much as 130,000 tons of copper on the London Metals Exchange in December, anticipating that prices would fall. He was proved drastically wrong as copper prices have more than doubled from US$3,112 a ton on June 1 last year to a current value in the region of US$7,610. Traders have said that China covered the losses by delivering copper to LME-monitored warehouses and cash settlements.
CNOOC raises US$1.8bn
The country's largest offshore oil and gas producer, China National Offshore Oil Corp (CNOOC), raised US$1.8 billion from the sale of 2.27 billion shares at US$0.79 each in its first share placement since its 2001 Hong Kong listing. The company's state-owned parent also sold 230 million existing shares at the same price, with proceeds to be contributed to the National Social Security Fund.
Quota boost for QFIIs
China's foreign exchange authority awarded US$350 million in investment quotas to three qualified foreign institutional investors (QFII), JP Morgan, DBS and JF Asset Management. Overseas investors in China are only allowed to hold tradable shares through QFIIs. The State Administration of Foreign Exchange (SAFE) said the 39 QFIIs, which have been awarded a total investment quota of US$6.32 billion since the scheme began in December 2002, had helped reform China's capital markets.