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财经观察 2127 --- Resumption of A Share IPO

(2009-05-26 18:41:03) 下一个
Resumption of A Share IPO

A summary of the supply and demand in A share market:

A total of 32 listcos are planning to raise roughly RMB72.2bn capital, among which China State Construction Engineer (RMB42bn), China Everbright Securities (RMB10bn) and China Merchants Securities (RMB8bn) are the larger ones. On top of that,  53 companies have announced placement plans, which will need at least another RMB50-60bn, bringing the total potential supply of paper amount to about +RMB120bn.

In terms of the demand appetite, though most of the mutual funds are sitting on quite heavy position (+85%, close to 2007 level), asset management companies continue to see inflows of funds given the buoyant stock market. YTD 38 new funds have raised RMB65bn, excluding necessary cash balance, it could provide RMB50bn capital to the market.

Industry source suggested that given the very positive sentiment towards A share market, it is likely to see a  similar amount of money going to mutual funds in 2H09, bringing the war chest to about +RMB100bn for 2009. So, it seems the supply demand is quite balanced. And don’t forget the existing individual stock accounts, of which only 39% has stock positions at the moment. If the economy continues to be healthy, retail investors would be back to the stock market again.

A share market is now trading at roughly 22x PE, which might be a relatively reasonable valuation range in regulators' view. And that's why the regulator wants to introduce IPOs to avoid a stock market  bubble due to lack of supply.

Top pick in the environment should be broker names. First 5M sector revenue has already increased by 40% YoY thanks to the strong market and increasing liquidity. The restart of IPO will be the next driver for their profits, especially for large players. Buy Citic (600030 CH), China Everbright (165 HK, which has roughly 40% stake in China Everbright Securities).


New Energy /Wind Power- Report says China will invest a total of RMB4.5 trillion in the energy sector. By 2020, total installed capacity will reach 150k KW for wind power, 20m KW for solar power, and 80m KW for nuclear power. As the technology of new energy is not yet mature, development will still depend on government subsidies. At the same time, more and more players are entering this sector, leading to overcapacity and price competition. There are over 70 plants in China capable of producing wind power equipments. Recently, one of the major wind power players Goldwind has to reduce its product price by 15%. New sector has surged sharply recently and some are already overvalued. Sell on strength.


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