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China set to relaunch IPO market

GUILIN Sanjin Pharmaceutical Co will launch the first initial public offering on Chinese mainland in nine months after a recovery in the sagging stock market allowed the regulator to lift its ban on new share sales, investment banking sources told Shanghai Daily.

The maker of traditional Chinese medicine received approval yesterday from the China Securities Regulatory Commission for the stock sale in Shenzhen, the sources said. Sanjin is expected to start preliminary price consultation with investors next week and may list its shares late this month or early next month, according to the sources familiar with the matter. The company could not be reached for comment.

Good value

"Sanjin is a small firm and its listing won't likely cause big pressure on liquidity or cause the index to plunge," said Xu Wenyu, a China Galaxy Securities Co trader. "The company can fetch a good valuation as people will definitely chase the first IPO after waiting such a long time."

The CSRC halted domestic IPOs in September after the Shanghai Composite Index slumped nearly 60 percent in the first nine months of last year on worries that more equity supply may lead the market to collapse.

The benchmark stock barometer has gained more than a third since the suspension started, partly as a result of the government's massive fiscal stimulus package.

On June 10, the CSRC introduced a new IPO pricing system favoring smaller investors. Under the new rules, institutional investors will no longer enjoy the privilege of also taking part in the retail tranche of an IPO.

The mechanism also for the first time sets the maximum number of shares an investor can seek in a single equity sale. An investor can apply to buy only up to 0.1 percent of all the shares available in an IPO.

Sanjin passed a hearing at the CSRC's listing panel in June last year but hadn't gained final approval before the regulator issued the ban. The company has said it plans to raise 634 million yuan (US$93.2 million) by selling up to 46 million shares.

"At the initial stage, only small companies like Sanjin are likely to gain the green light to launch IPOs, but the limited supply may fan speculation and bloat stock prices," said Liu Yu, an Orient Securities Co trader. "I think the regulator should allow the larger quality companies to sell shares as soon as possible."

According to earlier media reports, 32 firms that have passed the CSRC's IPO vetting are on the waiting list to issue a combined 14 billion shares or more in Shanghai or Shenzhen. Among them, construction conglomerate China State Construction Engineering Corp is expected to issue 12 billion shares to raise 42.6 billion yuan.

Sources said yesterday that cable producer Zhejiang Wanma Cable Co will likely be the second company to win CSRC approval to launch an IPO and that it could occur late this week or next week.


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