CSRC to look at 3 firms' IPO applications
China's securities regulator will review three initial public offering applications this week as it continues to accelerate the pace of share sales despite the rocky market.
The move is expected to further weigh on the A-share market, which just posted the worst monthly performance since October last year.
The China Securities Regulatory Commission will this week review an application to sell shares from China National Chemical Engineering, which is expected to raise nearly 3 billion yuan (HK$3.4 billion), as well as those from Shenzhen Haoningda Electronic Meter Manufacturing and Shenzhen Keybridge Communications.
The fresh equity supply has increased investor concerns about a boom-to-bust cycle on the mainland stock markets and deepened their disappointment at the authorities' apparent indifference to the market downturn.
'Concerns about new share supply have played a role in deterring investors,' said Jing Ulrich, JP Morgan's chairman for China equities. 'The regulator can potentially step up the approval of new mutual funds to improve demand.'
Mainland companies have raised 71.3 billion yuan in 21 share issues, 70 per cent of last year's total, since Beijing lifted a nine-month unofficial ban in June.
China State Construction Engineering, the country's largest home builder, netted 50.16 billion yuan in July, making it the world's largest initial offering this year.
The CSRC is facing a dilemma as cash-hungry companies are again eager to raise capital for growth while retail investors are hoping the regulator will curb new share supply to underpin the weak market.
The Shanghai Composite Index slumped 21.8 per cent last month, becoming the world's worst-performing stock benchmark amid concerns about slowing liquidity.
The banking regulator has put pressure on lenders to slow down loan approvals amid an inflow of speculative capital into stocks.
The CSRC approved a 16.8 billion yuan initial offering by Metallurgical Corp of China last week, and the company will sell its 3.5 billion shares on September 9.
Retail investors expected the regulators to take action when the Shanghai index fell below the 2,800-point level on August 19. Potential moves Beijing could take include curbing share issues and fast-tracking mutual fund approvals. But the CSRC failed to act.
'It seems more [offerings] are in the pipeline since listing candidates are hungry for cash,' said Dazhong Insurance fund manager Wu Kan. 'The pace won't slow unless the State Council gives new instructions to the CSRC.'
IPO boom
Since a nine-month listing ban was lifted, 21 firms have raised money
The cash raised since June as a percentage of last year's total: 70%