SHANGHAI: China has given the green light for 10 firms to list on the country’s stock exchanges, officials said, after a four-month hiatus on initial public offerings but analysts warned of a share glut in an already weak market.
New listings were approved in January following a year-long, Beijing-imposed freeze to reform regulations and halt a slide in share prices, but they were halted in February owing to concerns about the new process.
But the Chinese Securities Regulatory Commission (CSRC) said on Monday it had “approved IPO applications of 10 companies” and that they would be split between the country’s two stock markets in Shanghai and Shenzhen.
As of Tuesday morning, seven of the 10 firms had formally indicated their intent to list.
They include circuit board maker Ellington Electronics Technology which is seeking to raise 1.3 billion yuan ($213 million) in Shanghai, and Hongxiang Yixintang Pharmaceutical which expects to raise 794.5 million yuan in Shenzhen.
However, analysts said the timing of the decision could hit shares that are already listed.
“The resumption . . . will definitely lead to an imbalance between funds and stocks, and the market can only remain weak,” BOC International analyst Shen Jun told Agence France-Presse.
“But there’s no alternative on the policy front, given the extremely urgent financing needs from companies,” he added. “Direct financing from the stock market is the only way to alleviate the distress of cash-strapped firms.”
Worries over the weak domestic economy—and fears over a possible glut caused by new listings—have sent Chinese stocks lower this year. The benchmark Shanghai Composite Index is down almost four percent since the start of January.
So far over 460 companies have disclosed their IPO plans, according to state media, but the CSRC said last month it will only approve around 100 IPOs this year.
Despite the news, Shanghai rose 0.42 percent and Shenzhen added 0.63 percent Tuesday, as investors welcomed the release by the central bank of details of a targeted cut in reserve requirements for some banks.