China's First IPO in Nine Months Sees Big Demand, Dealers Say

Guilin Sanjin Pharmaceutical, the first firm to launch an initial public offering in China since September, started taking orders Monday, expecting the offer to be heavily oversubscribed, dealers said. The retail tranche of the IPO drew heavy demand from the outset with investors expecting Sanjin to shine on its debut due to ample liquidity in the market, analysts said. "As the first IPO, it is bound to appeal to retail investors and draw great amounts of subscription funds," Cai Junyi, an analyst with Shanghai Securities, told AFP. The company said last week it would raise 910.8 million yuan (US$133 million), or 44% more than originally planned in its prospectus for the IPO. It said 20%, or 9.2 million shares, of the offer was available for institutional investors while the remaining 80% was earmarked for retail investors. Cai said once Sanjin debuts on the stock exchange in mid-July, the price will have little to do with fundamentals and much more with market sentiment. "It's like that with all IPOs after moratoriums," he said. He estimated the stock would jump at least 50% on its debut. Guilin Sanjin said premarketing indicated the institutional tranche was 165 times oversubscribed. It is scheduled to announce the results of the subscriptions and the date of the debut later this week. China's securities regulators halted IPOs in September due worries that pressure on liquidity would worsen the already ailing domestic stock markets. The key index plummeted 65.5% last year as the global financial crisis kicked in. However, it has rebounded nearly 57% since the beginning of 2009. "The fact that the regulators kick off the new IPO approvals with small caps indicates they want a cautious approach to prevent sharp market falls caused by the new supply," said Yan Li, an analyst from Southwest Securities. Copyright Agence France-Presse, 2009