After a year of inaction, while the tricky problem of what to do with around US$250 billion of non-traded state shares was given some more consideration, the Chinese markets are again open for business and IPOs are expected again soon. The move has been prompted by recent progress on reforms. These, as reported by BusinessWeek, include:
• Investors will be compensated for dilution due to sale of non-tradable state shares.
• Companies that make up 65 percent of market capitalisation have already made plans for government shares to be traded after a one-year lock-in. The rest are set to follow suit.
• New IPOs will be made under rules that are in line with international norms, e.g. in terms of price-setting.
• Investors are increasingly sophisticated and demanding, and institutional (including qualified foreign) shareholders now account for 20-30 percent of the market.
The first new listing is reported to be a small one in Shenzhen – an offering of 60 million shares in China CAMC Engineering Co., Ltd., to fund investment in agricultural machinery.
However, around US$12.5 billion in new equity could be released in the next few months, according to estimates, and it is reported that around 30 companies have received approvals.
It is expected that large companies with existing overseas listings (which have been criticized by many for neglecting local investors) will also follow, including firms such as Air China, China Mobile (Hong Kong) Ltd. and PetroChina Corp., as well as the recently listed Bank of China.
See news sources:
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