Valuations, reforms eyed as China share listings resume

By Lu Jianxin and Jacqueline Wong

SHANGHAI (Reuters) - China's first two initial public offerings (IPOs) in 10 months will list in Shenzhen on Friday but the usual volatility from speculative trading will likely be tamped down because of listing reforms and high valuations.

Six analysts and fund managers surveyed by Reuters on Thursday see the shares of Guilin Sanjin Pharmaceutical Co and Zhejiang Wanma Cable Co rising as much as 100 percent from their IPO prices on their debut.

While a doubling in IPO prices is impressive by global standards, strong price gains are not unusual for Chinese firms, in particular, small caps with a limited number of shares offered and especially after a dry spell in IPOs.

China has reformed its equity primary-market system to ensure that major investors can only get a limited portion of IPO shares. The Shenzhen Stock Exchange has also introduce measures to crack down on excessive gains, reducing the chances of illegal share price rigging.

Relatively high valuations of the IPO shares may also dampen interest for some retail investors, analysts say.

"We will still see some die-hard punters who may simply not care about risks and firmly believe they can sell shares at even higher prices to others eventually," said senior stock analyst Ren Chengde at Galaxy Securities in Shanghai.

"But regulators are taking steps to crack down on price bubbles in new listings and high valuations of primary-market shares will deter speculation to some extent."

Guilin Sanjin 002275.SZ, a traditional Chinese medicine maker, raised 910 million yuan ($133 million) in an IPO on June 29 to fund technical upgrades and product development, it said in a statement published in the official Securities Times.