TCL Group's listing last week on Shenzhen's stock exchange could herald the bourse's reopening to companies' initial public offerings (IPOs).

TCL's IPO expanded the company's share capital to 2.59 billion yuan (US$311.56 million). The company's subsidiary, TCL Communications, will be delisted to let shareholders swap their holdings into shares of the newly listed company.

TCL's landmark move, however, was the first time in three years the Shenzhen exchange listed new shares.

The listing of TCL, a domestic home electronics manufacturer, has revived hopes the bourse will soon be ready for more share listings.

"We have made, for quite some time, preparations to resume companies' IPOs," Zhang Yujun, general manager of the Shenzhen Stock Exchange, told China Business Weekly.

"Everything, on our part, is ready."

But Zhang stopped short when asked if TCL's IPO marked the beginning of the exchange's new share listings.

"So far, it is too complicated to talk about it," he said.

Zhang told reporters, just two months ago, there was a good chance the exchange could resume IPOs by the end of December.

There has not been an official statement since then.

"It is expected the exchange's trading in new shares will resume in the first half of this year," said a market analyst with a Shenzhen-based securities firm. He asked to remain anonymous.

"But there might be only loose, if any, connections between TCL's listing and the exchange's resumption of IPOs. The latter is something the exchange would like to trumpet."

The authorities seem to favour the "reopening plan" rather than the plan raised earlier to merge the bourse with its Shanghai-based rival, he said.

They think China is such a big country for the co-existence of the two stock exchanges - one based in Shanghai, the country's booming financial centre, the other in Shenzhen, the neighbouring city of Hong Kong.

The authorities might also be pondering transforming Shenzhen's exchange into a bourse for start-ups and high-tech companies, he said.

The exchange stopped listing new shares three years ago to create a board that mimicked the US-based NASDAQ and the Hong Kong-based Growth Enterprise Board.

But NASDAQ-listed stocks plunged in 2001, and Chinese authorities began to doubt the feasibility of their plan to transform Shenzhen's exchange into a Chinese version of the NASDAQ.

Authorities later suspended the Shenzhen bourse's reopening, and rumours have since swirled that the bourse will be merged with its Shanghai-based rival.

The pick-up last year of NASDAQ-based stocks and the worsening of Chinese small, high-tech companies - due in part to shortages of funds - have made authorities think twice.

"Small and high-tech firms need new funding channels to finance their business expansions. Transforming Shenzhen's exchange might be a solution," said Yi Xianrong, a financial expert with the Chinese Academy of Social Sciences.

"By focusing on start-ups and high-tech companies, the Shenzhen-based exchange could differentiate itself from its northern counterpart," he said.

But authorities worry market regulations might not easily catch up with such practices, he added.

Shenzhen's exchange will likely resume listing new shares, but the proposal to create a start-up board is highly unlikely, suggest market analysts.

"It would be hazardous for investors to pour money into shares of poor-quality companies," said Xie Baisan, a financial professor with Fudan University.

"You should never sacrifice investors' or shareholders' interests in favour of the listed companies', regardless if they are grown-ups or start-ups."

Xie last year published a book, entitled "Professor Xie's Debates Over China's Stock Market," which called for massive reforms in the stock market's regulatory system to protect individual investors.

Cheng Siwei, vice-chairman of the Standing Committee of the National People's Congress, also opposes proposals to create a start-up board.

"With a comparatively low threshold for companies to list, a start-up board must have stricter regulations to guarantee the safety of investors' funds," he said last year.

TCL's deal was approved by a new 25-person committee of the China Securities Regulatory Commission.

TCL Group, which recently cemented a deal with France's Thomson SA and controls about 10 per cent of China's cellphone market, has been widening its international exposure since 1999, when it set up a television factory in Viet Nam.

(Business Weekly 01/13/2004 page2)