IPO surge may lower stock prices

Updated 2017-01-23 12:01:13 China Daily

Investors see renminbi depreciation and capital outflows as major market threats

Anticipation of the regulator's acceleration of new share sale approval as well as the push for financial deleveraging could be a source of pressure on the Chinese stock market in the coming weeks, analysts said.

There have been signs that Chinese regulator wants to accelerate the approval of initial public offerings this year as the pressure in the IPO pipeline has been mounting with more than 700 companies queueing to issue new shares.

In the past two weeks alone, the regulator approved 24 IPOs, more than doubling the number of deals during the same period of 2016.

"This is a signal that the regulator is speeding up the approval of IPOs, which could weigh on the current market price," said Li Yuebo, an analyst with Industrial Securities Co Ltd.

The China International Capital Corp estimated that the regulator will likely approve about 500 IPOs this year, raising roughly 300 billion yuan (.8 billion).

The State-run Xinhua News Agency last week quoted experts as saying that China's "normalization" of IPOs could help raise the financing efficiency of companies and direct more capital into the real economy. The report made the market more volatile, as investors worried that more IPOs could drain the market liquidity and push down stock prices.

The securities regulator also said on Friday that it will adopt new measures to curb frequent refinancing deals by listed companies or a single deal that raises an excess amount of capital. The regulatory move could help channel more capital into the IPO market.

Lu Xiaofeng, analyst with BOC International Co Ltd, said that the overall market will maintain the trend of consolidation ahead of the Chinese New Year holiday as factors, including the acceleration of IPOs, will lead to a reduced risk appetite among the investors.

Meanwhile, Gao Ting, head of China strategy at UBS Securities, said the Chinese government's effort to push for financial deleveraging will likely continue, which could be a source of pressure on the markets in the coming months.

In addition, 52 percent of investors surveyed by UBS identified depreciation of the renminbi and capital outflows as the biggest risk for the A-share market this year, followed by economic weakness driven by another property slowdown (32 percent) and spillover of bond market volatility into stocks (16 percent).

Nonetheless, the majority of investors polled by UBS are optimistic on Chinese stocks, with 86 percent expecting the MSCI China Index to strengthen in the next 12 months, and over 50 percent expecting at least a 5 percent increase.

"Nearly 80 percent of investors said they believe the rally in cyclical sectors will continue this year, as supply-side reform deepens and demand recovers," Gao said.

Also in the News

Nicole Kidman Recalls Oscar Glory: Loneliest Time
Showbiz2016/06/16 13:58July 26 2017 04:52:52

Nicole Kidman Recalls Oscar Glory: Loneliest Time

Attending Shanghai International Film Festival, Nicole Kidman talks about her role in "Grace of Monaco".

Labor Day Travel Peak Starts
Also in the News2014/05/01 12:16July 26 2017 04:52:52

Labor Day Travel Peak Starts

Johnny Depp Delivers a Speech 'Evolve the Future' in 'Transcendence'
Also in the News2014/04/18 13:18July 26 2017 04:52:52

Johnny Depp Delivers a Speech 'Evolve the Future' in 'Transcendence'

Hollywood star Johnny Depp's speech in the upcoming new film "Transcendence" has been disclosed on Friday, April 11th.

Most Watched

News:
China World Business Sports Showbiz Audio
Video:
C4 My Chinese Life The Sound Stage China Revealed Showbiz Video Travel Video
Photos:
China World Fun Travel Entertainment Sports
Travel:
Beijing Shanghai Guangzhou
Lifestyle:
Live Music Opera & Classical Movies Traditional Shows Exhibitions
Learn Chinese:
Chinese Studio Living Chinese Everyday Chinese Just For Fun Chinese Culture Buzzwords