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SHANGHAI: China's first major new share offering since last year rocketed out of the gates on Monday, in the latest sign that the country's efforts to shore up its economy are fuelling speculative fervour.
The market's attention will now turn to other initial public offerings (IPOs) set to hit the market in the coming weeks, including the world's biggest so far this year today.
Analysts increasingly talk of a possible bubble forming in China's high-flying asset markets, including stocks.
Shares of Sichuan Expressway tripled on their first day of trading on the Shanghai Stock Exchange, closing at 10.90 yuan. At one point, its shares were quoted at 15.25 yuan, more than four times the IPO price of 3.60 yuan.
Trading in Sichuan Expressway was suspended twice during Monday's session after price surges triggered newly implemented circuit breakers on IPOs that are designed to temper investor enthusiasm.
Fundamentals for the road company played little part in the gains, analysts said.
Instead, investors were placing speculative bets in a market that has already gained 90 per cent this year based on the benchmark Shanghai Composite Index.
Continued gains in China's stock market illustrate how money has whizzed through the economy even as much of the world remains crimped by recession. While other global markets also are strong this year on hopes of an economic recovery, analysts say China's market is driven by slightly different factors.
The surge in stocks mostly reflects how record lending by China's banks has supported the economy and left it flush with cash.
Chinese regulators on Monday ordered banks to ensure unprecedented volumes of new loans are channelled into the real economy and not diverted into stocks or real estate markets, where officials say fresh asset bubbles are forming.
The new policy requires banks to monitor how their loans are spent. It comes amid warnings that banks ignored basic lending standards in the first half of this year as they rushed to extend 7.37 trillion yuan (S$1.5 trillion) in new loans, more than twice the amount lent in the same period a year earlier.
Today, shares of home builder China State Construction Engineering are expected to begin trading in Shanghai in what analysts describe as the world's largest IPO this year. The company already has secured 50.2 billion yuan by issuing the shares.
Other IPOs in the pipeline are those of Everbright Securities, an arm of state-controlled China Everbright Group, and Agricultural Bank of China, the last of the country's Big Four state-backed lenders to list shares.
REUTERS
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