A public offering review committee on Friday 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 on Monday, according a Reuters report on
Friday.
The bank aims to issue 60 per cent of shares to institutional investors on
June 19, and the remaining 40 per cent to retail investors on June 23, the
report said.
China's stock market fell back this week after May's increase, leading to
concern that the upcoming initial public offerings (IPOs), such as the BOC IPO,
would draw funds from the market.
The fall this week was 7 per cent, 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 per cent 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 up-coming 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 per cent this week, it has still gained 34
per cent 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.
