Walter Hutchens’ Blog

China’s mainland exchanges suspended new listings last April. The IPO ban was intended to assure stability during the process of reforming the share classification system for already-listed companies. That process has advanced substantially. Reports indicate companies representing about 70% of the market’s total capitalization have already undergone share classification reform or have started the process. When big cap stocks like Sinopec join the list of “G-firms” (firms that have changed or gai their share classification), the percentage will be near 90%.

Thus last week China began allowing IPOs on its two mainland exchanges after more than a year hiatus.

The first firm to get a listing go-ahead was Beijing-based China CAMC Engineering (中工国际 Zhong Gong Guoji). It is a state-owned firm, suggesting that the resumption of IPOs doesn’t herald a new direction for China’s stock markets (on the other hand, these initial IPOs are a backlog of firms approved prior to the ban, so new IPO approvals could still, conceivably, go in a new direction more favorable to private firms).

Second will be Coship Electronics (同洲电子 Tong Zhou Dianzi).

Yunnan Salt and Chemical Company ( 云南盐化) is the third firm that will conduct an IPO since China’s domestic listings resumed.

By year-end non-tradeable (legal person and state-owned) shares of most listed firms will have been made, theoretically, tradeable. That’s an important step forward for China’s stock markets, though it remains unclear whether 1) any real privatization in existing listed firms will occur as a result and 2) if more private companies will be able to access capital markets now that the IPO ban is lifted.

The Shenzhen Stock Exchange must be particularly happy to see these initial listings coming its way. IPOs there have been sparse for even longer than the general IPO ban for the conversion of listed firms to G-share structures.

China Daily commentary on the resumption of IPOs is here and here.