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Record money to be locked up for IPO subscription

Xinhua, June 13, 2015 Adjust font size:

The amount of frozen capital in China's A-share market will hit a new high with the release of new IPO subscriptions.

Twenty five companies are scheduled to launch IPOs next week and are looking to raise nearly 42 billion yuan (6.87 billion U.S. dollars).

According to China's market rules, stock investors are required put in capital to join a lottery system for IPO share purchases. The more capital they prepare, the more IPO shares they are likely to get.

The amount of locked capital may hit its highest point since 2014, reaching 5.7 trillion yuan next week, forecast Zhu Zhenxin, an analyst with Minsheng Securities.

The last time such a large amount of capital was involved was in January 2014, when securities regulators reopened access to the capital market for dozens of eager enterprises looking to be listed.

Shares usually soar after official trading begins, the reason behind investors's wish to put up cash for IPO share purchases.

Guotai Junan Securities Co. is expected to raise around 30 billion yuan, the biggest IPO seen in the recent five years, which means roughly more than 3 trillion yuan from investors will be locked.

Zhu predicts the new wave of IPOs will weigh on the market as liquidity will be greatly drained, but the tightening will be eased after money gradually gets unlocked.

Chinese shares closed higher on Friday, with the benchmark Shanghai Composite Index up 0.87 percent to finish at 5,166.35 points. Endi