By Jason Simpkins
Managing Editor
Money Morning
China lifted a 10-month moratorium on initial public offerings (IPOs) today (Friday) in a move that highlighted the government's renewed confidence in the stock market and sent shares Chinese brokerages soaring higher.
Guilin Sanjin Pharmaceutical Co. on June 29 plans to sell 46 million A shares on the Shenzhen Stock Exchange, making it the first company in 10 months to gain approval for such a listing from the China Securities Regulatory Commission (CSRC).
The CSRC stopped allowing public offerings last September after China's benchmark bourse, the Shanghai Composite Index, plunged 60% from since the start of 2008.
With the Shanghai Index up 58% this year, regulators have regained confidence in the market. However, analysts say that by choosing a small firm, the CRSC is still testing the waters before it allows larger companies to move forward with their listings.
"To start with the smaller companies showed the regulator's determination to shore up the market, with a testing gesture first," Wen Lijun, an economist at Nanjing Securities, told The Associated Press.
Other approvals are expected to follow as early as next week, if not this afternoon. Some 32 companies have already gained preliminary approval from the CRSC and are waiting to be listed, including 28 small firms that will join Guilin Sanjin on the Shenzen. The four larger companies will list on the Shanghai exchange.
The market responded positively to the listings with the Shanghai Composite jumping 26.59 points, or 0.9%, to close at 2,880.49. The index rose 5% on the week. The Shenzhen Composite Index edged up 0.3% to 943.87.
Brokerage firms were the big winners on both exchanges, as the resurrection of the IPO market will lead to more deals and more fees. Citic Securities Co., China's largest brokerage by market value, rose 2.8% to 29.54 yuan. Sinolink Securities Co. surged by the 10% daily limit, Hong Yuan Securities Co. gained 3.8% and Northeast Securities Co. jumped 5.7% to 31.96 yuan.
News and Related Story Links:
-
Associated Press:
China shares rise after 9-month ban on IPOs ends