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 Anticipation of a busier IPO pipeline stems from the belief that the
market's recent rally has reduced concern among regulators that an
increase in supply could spook investors.
The China Securities Regulatory Commission (CSRC) said late on
Monday it had approved listings by 20 firms - about twice the
average monthly average last year - underscoring its desire to throw
open the IPO market.
"It makes sense for them right now - given how fast the market's
gone up - to actually suck up some of the liquidity with the new
IPOs," said Francis Cheung, head of China equity strategy at CLSA in
Hong Kong.
"They need to balance. I don't think they want to crash the market,"
he said.
The stock market, which rallied over 40 percent in the fourth
quarter of 2014, fell on Tuesday and rose marginally on Wednesday.
It was the best performing major market in 2014, rising to its
highest levels in close to five years.
Around 650 companies are currently waiting to list, with most of
them in the line since before late 2012 when CSRC froze all IPO
approvals for over an year as it overhauled the market. Many
unlisted small and mid-sized firms have been struggling to find
sources of funds outside of China's overburdened banking system.
BIG YEAR SEEN
Analysts at Deloitte estimate between 180-200 mainland companies
will raise between 100 billion yuan and 120 billion yuan ($16.1
billion to $19.3 billion) via IPOs this year. Manufacturing,
consumer and retail and emerging industries will dominate the
offerings, they said.
PriceWaterhouseCoopers forecasts China's IPO market in 2015 could be
even bigger, raising around 130 billion yuan.
Last year, 125 companies raised a total of $11.2 billion, with
technology firms accounting for about 47 percent of all proceeds,
according to Thomson Reuters data.
NEW PROCEDURES COMING
Unlike many developed markets, China applies an approval-based
system in which the regulator decides which firms would get to list
and when.
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But the CSRC has said it will be moving to a registration-based
system similar to those used in the United States and other
developed markets as part of broader efforts in opening up its
financial system.
The new system, which analysts expect could be rolled out this year,
aims to allow market forces to determine the reception and pricing
of IPOs and speed up the process for the long line of hopefuls.
Zhang Gang, an analyst at Central China Securities in Shanghai, said
he believes the system will be rolled out in the second half of this
year. Its introduction could briefly cause volatility in the market,
he said.
For years prior to late 2014, mainland stock markets stayed in the
doldrums. But spurred by a surprise interest rate cut in November
and the launch of a stock link between Shanghai and Hong Kong stock
exchanges, they have been on a tear.
The CSI300 index of top Chinese companies rose 44 percent during the
fourth quarter in what some analysts dubbed a "crazed bull run". It
ended the year up 52 percent.
($1 = 6.2079 Chinese yuan)
(Additional reporting by Denny Thomas in Hong Kong, Jake Spring in
Singapore and the Shanghai newsroom; Editing by Richard Borsuk)
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