Opinion

IPO may test capital market resilience, say analysts

By Wang Bo and Mao Lijun (China Daily)
Updated: 2010-01-05 08:06

After a glut of new listings last year, the capital market may see its first major test this year in the impending share float of the Agricultural Bank of China (ABC).

The bank plans to raise nearly 150 billion yuan ($21.97 billion) in the Shanghai and Hong Kong markets as early as April this year, according to a source close to the matter.

The move has raised concerns that the hefty offering could upset the market, which is already reeling under the onslaught of a slew of year-end floats.

The benchmark Shanghai Composite Index dropped for four consecutive days in the middle of December last year following the massive share sales led by CNR's 2.04 billion yuan float. CNR is a leading provider in the field of locomotive and rolling stock.

Chinese stock exchanges, including the Hong Kong bourse, raised double the amount of capital secured by IPOs across the United States in 2009. Global accounting firm Ernst & Young forecast the value of IPOs in Shanghai would reach 380 billion yuan in 2010, three times the amount of funds that Chinese companies raised last year.

"ABC's share sale will definitely test market resilience, even though the amount of capital to be raised is not beyond investors expectations," said Fu Lichun, a banking analyst with Southwest Securities.

Analysts said the launch of the international board and stock index futures and possible monetary policy shift would also cause uncertainties on the market trend of the mainland bourses this year.

"The securities regulator will carefully control the rhythm of new listings, and thus it is possible to digest the listing without any negative consequences," said Chen Xi, an analyst with First Capital Securities.

The nation's other three major State-owned lenders have utilized the proper window to get listed in the past few years. Industrial and Commercial Bank of China, China Construction Bank and Bank of China saw their shares gain 5.13 percent, 32.3 percent and 23.1 percent during their Shanghai debut, without causing major swings.