Center

Stocks to float again before May 1 after a year's suspension

By Zhang Ran (China Daily)
Updated: 2006-04-15 09:17
Large Medium Small

China's stock market is expected to resume floating stocks before May 1 after a year's suspension.

A source from the China Securities Regulatory Commission (CSRC) confirmed on Friday that the CSRC will permit domestic listed firms to launch seasoned equity offerings before the week-long holiday at the start of May.

Seasoned equity offerings are the new equity issue of securities by a company that has previously issued securities to the public.

The Chinese securities regulator has decided to let the seasoned offerings of initial public offerings (IPO) go ahead, according to Shang Fulin, Chairman of CSRC, who made the announcement earlier in February.

The CSRC source did not reveal the date the offerings will begin, but said it would be before May 1.

"It could also be very soon," he told China Daily.

Domestic financial newspaper China Business News said on Friday that the CSRC had spoken with several listed companies, informing them to prepare for the coming seasoned offerings.

The newspaper also said that the CSRC would issue the seasoned equity offering rules on April 15.

Experts believe that the seasoned offering is more crucial than the IPOs to test whether the market is strong enough to take the pressure of stock floating.

"If the market has the capacity to bear the seasoned offering, then the resumption of IPO, which could probably go ahead after June, will not be a problem," Cheng Weiqing, an analyst with CITIC securities said.

"There will be more capital such as insurance funds flowing into the stock market then," he added.

Currently more than 200 companies out of more than 1,300 listed firms are able to launch seasoned offerings. More than 70 companies have submitted applications to the CSRC to float more shares.

Shanghai listed firm China Yangtze Power Co Ltd is expected to be the first to launch its seasoned offering to raise around 5 billion yuan (US$ 625 million) in capital from the A share market.

"Yangtze Power's coming seasoned offering might be special. The company will probably launch a certificate instead of stocks to raise money," said Zhang Qi, an analyst with Hai Tong Securities.

The company's financial report for last year displays a 3.3 billion yuan (US$ 412 million) net profit, a 9.86 per cent increase compared to the previous year.

According to Zhang, the price of the Yangtze certificate will be around 5.5 yuan (68.8 US cents), lower than its current stock price.

China kicked off its securities reform and suspended simultaneously the launch of IPO and seasoned offerings on April 29, 2005. The country's stock market had suffered a five-year regression since 2001.

Chinese shares have staged a strong rebound in 2006. The benchmark Shanghai composite index jumped 2.04 per cent to 1,359.538 points on Friday, its highest level in nearly 17 months, after losing 2.04 per cent the previous session.

Steel stocks rose universally, encouraged by a robust margin forecast from Angang New Steel Co Ltd, while investors also chased banking firms including top Shanghai-listed Merchants Bank Co.