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China Construction to launch online subscriptions for IPO

CHINA State Construction Engineering Corp will launch online subscriptions for its shares tomorrow to raise as much as 50 billion yuan (US$7.32 billion), which may challenge the rallying Shanghai stock market.

The country's largest housing contractor will issue 12 billion shares at 3.96 yuan to 4.18 yuan each, according to its statement to the Shanghai Stock Exchange today.

"The IPO can be seen as a signal that the securities regulator wants to calm down the overheating stock market, but we don't think the new share sales will fundamentally change the upward trend as investors have already digested the news," said Tu Jun, an analyst at Shanghai Securities Co.

Analysts expect that the subscription may suck up 1.6 trillion yuan, substantially reducing the amount of money in the market as investors set aside funds for the IPO.

"The Shanghai Composite Index, which has gained nearly 80 percent so far this year, may face short-term fluctuations due to the IPO, but it will recover over a middle term," Tu said.

State Construction's IPO is the biggest on the Chinese mainland after PetroChina raised 66.8 billion yuan in October 2007 and also the world's biggest since March 2008 when Visa Inc collected more than US$19 billion.

The company plans to use the funds to expand in residential construction as a surge in bank lending has driven a rebound in the housing market.


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