IPOs set to double to $44 billion

A view of the office building of the China Securities Regulatory Commission in Beijing, Dec 9, 2016. [Photo/VCG]

Analysts say positive initiatives from authorities are powering the growth

The amount of China's initial public offerings is expected to total 300 billion yuan ($43.7 billion) in 2017－double that of last year－as a result of several official initiatives supporting them, analysts said on Thursday.

That projected figure compares with the total amount of 150.4 billion yuan last year, according to accounting firm PwC.

Hu Xiaohui, chief strategist at LC Securities, said China's securities regulator had released a series of documents, the latest on Wednesday, supporting companies in China's less-developed regions and in industries such as energy conservation and environmental protection and agriculture, to go public.

"Because of these important documents, I expect the total IPO amount this year will be far more than last year and total 300 billion yuan," Hu said, adding that the stock market would be able to handle the pressure.

China's securities regulator released a statement on Wednesday saying that the energy conservation and environmental protection industry was important for China's economic transformation－and it would support companies in the industry to secure financing by going public.

"Most energy conservation and environmental protection companies are small and micro ones and they face difficulty in getting loans from banks," the statement said.

"The commission will continue to support these companies to grow stronger in the capital market."

In January this year, the China Securities Regulatory Commission and the Xinjiang Uygur autonomous region government signed an agreement that companies in the autonomous region meeting requirements could get the green light to go public.

Liu Shiyu, chairman of China Securities Regulatory Commission

Liu Shiyu, chairman of China Securities Regulatory Commission, said in August that the commission would also help companies in the Xinjiang Uygur autonomous region that are to be listed or had already listed.

The following month the CSRC released a statement that it would give the green light for companies in poorer regions to go public.

LC Securities chief strategist Hu Xiaohui said on Thursday that the IPOs would add substantially to the total levels of direct financing in 2017.

Companies can utilize direct financing to access funds from the capital market by issuing shares or bonds, rather than from costly intermediary institutions like banks or insurers.

Hu said energy conservation and environmental protection and agricultural companies could add roughly 10 billion to 20 billion yuan to the total direct financing amount in 2017.

Companies in the Xinjiang Uygur autonomous region and poorer regions would add about 50 billion yuan, he said.

"Other positive factors boosting the direct financing amount can be the acceleration of IPO approvals, and companies listed on the new third board can be transformed to list on the A-share market," Hu added.

Zheng Hong, chief investment advisor of Datong Securities, said there was an increasing trend for companies meeting the necessary requirements to obtain funds by direct financing.

"It may be difficult for them to have indirect financing, but now they can finance at a lower cost by going public," Zheng added.

A report by Xinhua News Agency on Thursday said the pace of new share listings was slowing down after the Spring Festival and the regulator was going to avoid too much financing in 2017.