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Chinese nod for 12 floats to cool rally
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CHINA’S securities regulator has unexpectedly approved 12 initial public offerings, a move which could cool a blistering rally in the country’s stock markets which has seen the benchmark CSI 300 index surge over 30 percent in two weeks.
The IPO approvals include budget carrier Spring Airlines’s 1.76 billion yuan (US$284 million) listing. Medium-sized Chinese brokerage Guosen Securities as well as a textile maker and environmental technology services provider are also on the list.
The move signals the potential acceleration of the pace of IPOs in China, which would be good news for investment bankers, underwriters and the hundreds of companies queued to list. But it may be negative for stock indexes as analysts suspect the timing of the announcement is aimed at cooling the mainland’s red-hot market.
The CSI 300 index has rallied in record volume amid speculation that the central bank will further ease monetary policy to shore up the cooling economy.
That rally, which has attracted billions of fresh investor money into shares, has now given the regulator the space to accelerate the pace of IPO approval without over-diluting valuations of existing shares, especially given that many firms have seen their price-earnings valuations double in recent weeks.
But the rally has also encouraged the exuberant use of leverage as investors borrow to buy into the market, a worry for financial regulators. Approvals are announced around the 20th of each month, so the news was seen as a potential precursor to an upcoming flood of offerings.
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