IPOs Experienced Mixed Fortunes in 2008
Towards the end of 2008, China's securities market went though the craziest "switchback" in its history. The 2006-2007 rising tide that originated at the end of 2005 brought the Shanghai Composite Index to the peak of 6,124 points in October 2007. In mid-January 2008, the index still remained high at 5,500 points. As the "going-mad theory" and the "bubble theory" about China's securities market raged, the China Securities Regulatory Commission introduced relevant policies in an effort to safeguard the healthy and steady development of the market. Keeping the fast speed of IPOs was to delay the fast growth of the index through increasing stock supplies in the securities market.
On the whole, a total of 76 enterprises had their IPOs in China's securities market in 2008, raising 103.473 billion Yuan in total. Among them, four were publicly listed in the Shanghai Stock Exchange with the other 72 on the SME Board in Shenzhen. In 2008, the Issuance Examination Committee of the China Securities Regulatory Commission examined 116 enterprises, of which 20 enterprises failed, leading to an issuance examination passing rate of 82.76%
IPOs Grew Fast in 2008H1
Raising 89.86 billion Yuan in total, 48 enterprises were listed in China's securities market in 2008H1, including three listed on the Shanghai main board market and the remaining 55 in the Shenzhen SME board.
In 2008, IPO issuance examinations gathered pace. A total of 82 enterprises were examined in the first half of the year. Among them, 69 enterprises successfully passed the examination while 12 failed, giving an issuance examination veto rate of 14.6%.
IPO Issuance Examination Work Basically Came to a Halt in 2008H2
In 2008H2, a total of 18 enterprises were listed, including one in Shanghai and 17 on the Shenzhen SME board, raising 13.613 billion Yuan in total. In the second half of the year, a total of 34 enterprises were examined for listing, with 27 approved and seven denied, giving an issuance veto rate of 21%. After the China Securities Regulatory Commission examined and approved Hunan Boyun New Materials Co., Ltd. on September 16, 2008, IPO issuance examination work in China's securities market quietly came to a halt for the rest of the year.
Manufacturing was Still the Key Industry for IPOs
29 of all the 76 listed enterprises in 2008 came from the manufacturing industry, accounting for 38.16% of all the newly listed enterprises of the period. Eight from the energy industry and the minerals industry as well as the mining industry were also listed, accounting for 10.5% and 9.21% of the newly listed enterprises in 2008. The chemical industry and the IT industry each had seven enterprises newly listed, accounting for 9.21% of the total in 2008.
Southeastern Coastal Regions were the Main Source of IPOs in 2008
47 of the 76 newly listed enterprises in 2008 came from southeastern coastal regions, accounting for 61.8%. Guangdong contributed to the largest number of listed enterprises, with 14 successfully completing listing, followed by Zhejiang, with 11, and then by Jiangsu, Shandong and Fujian. Among the inland provinces, Sichuan had a rather big number of listed enterprises, with a total of six enterprises successfully completing their listing.
Among the 116 enterprises examined for stock issuance, 22 came from Guangdong Province, accounting for 19.0%. Zhejiang and Jiangsu closely followed, with 13 and 11 respectively. Beijing as the economic and political center of China saw 12 enterprises examined for stock issuance, gaining a place in the top 3.
On the whole, IPO issuance examination work in 2008 was loose and fast in the first half but tight and slow in the second half of the year. In 2008, there was a notable fall in the total amount of funds raised from 2007. In addition, there was also a notable fall in the number of listed enterprises and enterprises examined for stock issuance. Southeastern coastal regions continued to account for half of the listed enterprises. As the US sub-prime crisis continued to worsen, the financial crisis gradually spread. The following economic crisis sped up the deterioration of China's securities market environment. Falling stock indexes slowed down Chinese enterprises' IPO processes. The question now is when will the IPO issuance examination work that halted in September 2008 start again? This has touched a sensitive nerve for various enterprises, investment banks and investors. In 2009, an unusual spring will come, one that will be especially chilling!
The IPO Spring Will be Particularly Chilling in 2009
In 2009, the spring for IPOs in China's securities market will be late and especially chilling. There will be more uncertainties in the IPO market, and factors affecting IPOs are not clear yet.
First, a global economic crisis has arrived quietly and its destructive impact may have a certain lag. Though the Chinese government and governments of other countries have all adopted proactive fiscal and monetary measures to cope with the crisis, there is a certain lag for these measures to produce results. On the other hand, it is difficult to establish consumer confidence in the short term. The external environment, which affects the trend of China's securities market, is no cause for optimism.
Second, China's securities market faces tremendous internal pressures. The lifting of the ban on the sale of non-tradable shares has become a double- edged sword for the stable and healthy development of China's securities market. The rush to reduce holding of "non-tradable shares" is a major cause of the stock market crunch. It may take 3-5 years to reduce the holding of "non-tradable shares", while it takes 5 years to complete non-tradable share reforms. The non-tradable share issue arising from non-tradable share reforms in the Chinese market cannot be resolved until around 2010. However, newly listed companies also bring about new non-tradable share problems. On one hand, non-tradable shares have become a stabilizer for market confidence. Meanwhile, strong market supply has also become a "roaring tiger" in the capital market.
Third, a large number of enterprises that have completed their early IPO work have been reported to the Issuance Examination and Approval Committee of the China Securities Regulatory Commission. Incomplete statistics show that by the end of 2008 various securities brokers had reported over 300 enterprises to the China Securities Regulatory Commission for IPO examination. A sluggish economy since the second half of 2008 has caused a certain drop in the market performance and revenues of the enterprises applying for IPO examination. To reduce issuance examination risks, some enterprises will postpone their IPO schedule.
However, as fresh blood is injected into the securities market, IPOs for some superior quality companies will not be far away, because it is an effective way for them to attract funds. Restarting the IPO market will also be an effective approach to improve China's capital market system and drive the circulation of venture capital and industry capital. Promoting the development of industry capital through venture capital is a logical road to achieve frogleaping industry development.
In 2009, China's IPO market will certainly see its spring. While this spring may feel a little cold and arrive a bit later than usual, IPOs in China's capital market in 2009 will be as splendid as ever!