China’s IPO market continues to gain traction with four companies announcing they’ll be listing soon. They’re hoping to raise a combined 270 million dollars. Maryam Behmard joined us in Shanghai.
There are positive reaction so far. Shanghai Lianming Machinery, which will list on the Shanghai Stock Exchange, is aiming to sell up to 20 million shares. Three other companies, to be listed on the smaller Shenzhen Stock Exchange, are looking to raise a combined 1.5 billion yuan. That’s a total of $274 million between all four companies, if all goes as planned.
Most analysts agree that Chinese IPOs have outperformed U.S IPO’s by about 35 percent on average. Looking ahead there’s some market anxiety that Alibaba’s IPO could deflate the rest of China’s IPO market. The China Securities Regulatory Commission is planning about 100 IPOs for the rest of this year, bringing the full-year tally up to 150.
There are mixed views on policy changes. Some analysts are saying the policy reform will improve the quality of IPOs as part of broader reforms and help fix the securities market. Others, however, argue the CSRCs tightened rules on IPO pricing has also intimidated some firms into “voluntarily” suspending their listings. The CSRC denies such charges.
The policy changes were prompted by insider trading in China’s IPO market, which prompted the 14-month suspension. New IPOs in January then faced another pause. Some financially weaker companies are allowed to list, at the same time making it easier for owners and cornerstone investors to cash out on the primary market for the first time. Some investors are saying that by allowing this, the CSRC may have inadvertently encouraged overpricing.