China ends year-long listings freeze

Regulator authorizes first five IPOs of 2014

Chinese authorities have approved initial public offerings of five companies, re-opening the mainland’s IPO market after a freeze of more than a year.

The companies have permission to launch IPOs as early as January 2, which could raise as much as $350 mn in total on the Shenzhen and Shanghai stock exchanges, according to filings. Another 45 Chinese companies or so are expected to be ready to launch IPOs by the end of January.

Although China was the world’s largest IPO market in 2010 with $71 bn in proceeds, the country has seen no new IPOs in more than a year as authorities, including the China Securities Regulatory Commission, set out to adopt a ‘regulatory-based’ system instead of the current ‘approval-based’ system that has dramatically slowed issuance.

The approval-based system gave the CSRC the sole power to authorize an IPO, meaning the process can take years and involve multiple interviews in which regulators seek to determine whether the company can sustain profitability. Under the regulatory-based system, companies have to undergo legal and financial checks, but would be free to choose the timing and size of their IPOs.

Besides the 50 companies expected to launch IPOs in January, 760 more are awaiting permission from regulators, CSRC said last month.

The largest of the five companies with listing approval is industrial valve manufacturer Neway Valve, which aims to raise 839 mn yuan ($140 mn), through the sale of 120 mn shares on the Shanghai Stock Exchange. Neway says in a filing with the exchange that it plans to start marketing its shares early in January.

The other four companies – appliance manufacturer Guangdong Xinbao Electrical Appliances Holdings, drug maker Zhejiang Wolwo Bio-Pharmaceutical, Truking Technology and Guangdong Qtone Education – plan to launch on the Shenzhen Stock Exchange, either through the SME Board for small and medium businesses or the ChiNext board for startups.

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