Eleven Chinese companies raised a total of 20.03 billion yuan (US$2.5 billion) through public offerings on China's A-share market in July, according to latest statistics released by the China Securities Regulatory Commission.
In June, ten companies raised 34.8 billion yuan, including five initial public offerings (IPO).
Of the eleven companies, nine raised 18.32 billion yuan through IPOs, and two refinanced 1.7 billion yuan on the stock market.
Analysts believe recent weak market performances have made about-to-list companies cautious about their public offering applications, with funds raised through IPOs likely to continue to drop in the next few months.
The huge amount of capital raised in June can be attributed mainly to the IPO of A-shares made by the Bank of China on the Shanghai bourse. In July, the Daqin Railway IPO was the largest, but considerably smaller than the Bank of China in terms of fund raised.
Air China, the country's largest air carrier, which launched its IPO this month on mainland market, only raised around 4.5 billion yuan from the share sale, substantially less than the eight billion yuan the carrier had initially hoped for.
Air China earned the dubious distinction of becoming the first company to see its opening price dip under its issuance price since China resumed IPOs in June 2006.
Air China's secretary Zheng Baoan said weak market conditions had prompted the company to reduce the number of shares offered to investors.
The move reflected the company's responsible attitude to both investors and markets, he added.
The State-owned Industrial and Commercial Bank of China (ICBC), which plans to list on the mainland's A-share market and on Hong Kong's H-share market in the final quarter of 2006, may face the same kind of financial embarrassment as Air China. Insiders with the ICBC said short-term market factors wouldn't affect the bank's IPO plans. Since regulators reinstated share sales in mid-June after the year-long freeze, over US$6 billion in stock has hit the market, sparking investor concerns that capital flows could dry up and send the market tumbling.
The current problem is not a problem of funds in the domestic market but a problem of overpriced new shares, said Xie Wei, an analyst with Southwest Securities Company.
Problems will be solved if share issuers reduce their IPO prices to a reasonable level, he said.
Capital will continue to flow into the market in the second half of 2006, Xie said.
Turnover on the Shanghai and Shenzhen Stock Exchange totaled 809.52 billion yuan in July, a drop of 9.98 percent from the figure for June, but surging 271.92 percent over the same period last year.
(Xinhua News Agency August 24, 2006)