A public offering review committee yesterday gave the go-ahead
to a Bank of China (BOC) plan to issue around US$2.5 billion worth
of A shares on the domestic market.
The investment opportunity, which could be launched soon, is
expected to be the largest share offering on a domestic bourse.
Sources close to the deal revealed BOC would publish the
prospectus for its domestic initial public offering (IPO) on
Monday, according a Reuters report yesterday.
The bank aims to issue 60 percent of shares to institutional
investors on June 19, and the remaining 40 percent to retail
investors on June 23, the report said.
China's stock market fell back this week after last month's
increase, leading to concerns that the upcoming IPOs, such as the
BOC IPO, would draw funds from the market.
The fall this week was 7 percent, the biggest weekly drop in
more than three years.
The benchmark Shanghai composite index on Friday closed at
1,551.384 points, down 2.52 percent from Thursday.
Turnover in Shanghai A shares was a moderate 25.8 billion yuan
(US$3.22 billion).
Dong Chen, an analyst with CITIC China Securities, said it was a
natural dip, as investors have gained much over the past month.
"It is a good time for investors to sell shares to make a
profit." Dong said.
"The upcoming IPOs will draw some funds away from the current
market," he added.
Dong pointed out that the imminent arrival of non-tradable
shares on the market was another factor contributing to the
withdrawal of liquidity.
"When shares rose to more than 1,400 points and started to soar
in May, it was as much to do with the abundant flow of money in the
market as it was to do with listed companies' good performance,"
Dong said.
He believed there would not be another bear market, but the
index would not likely break the 1,700-point barrier this year, a
symbolic figure.
"Even though the index dropped 7 percent this week, it has still
gained 34 percent since the start of this year."
Analysts believe the central bank's tighter control of the money
market, which cut down the amount of money flowing into the stock
market, also contributed to the fall in share price.
"Money market funds were greatly affected over the past month
when investors started to enter the stock market," said Hu Hao, an
analyst with China Merchants Securities, warning investors to pay
close attention to the money market.
(China Daily June 10, 2006)