China Starts Reform in IPO

Two Chinese companies announced Wednesday that they would allocate part of their shares to investors in the secondary market, marking the beginning of China's reform in initial public offering (IPO) by enterprises.

According to their announcement, the Dahua Co. Ltd. in Cangzhou city of north China's Hebei Province will be offering 80 million shares to the public, of which 32 million shares will be available to secondary market investors.

The Tianjin Cement Co. Ltd., which is offering 70 million shares to the public, will also offer part of the shares to secondary market investors.

The China Securities Regulatory Commission (CSRC) announced last February that after allocations to securities investment funds, enterprises would have to offer half of the remaining shares to secondary market investors in their IPOs.

According to the CSRC, secondary market investors can purchase 1,000 shares of new stocks for every 10,000 yuan in market value of stocks they currently hold.

The reform was welcomed by the market. Analysts said it would establish an interaction between the primary and secondary markets, reduce the unreasonably high profit in the primary market and increase capital supply to the secondary market.

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