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Stock Strategist

China Capital Markets Warming Up to New IPOs?

Chinese firm Zhongwang plans a $1.6 billion IPO in Hong Kong.

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Zhongwang, China's largest aluminum extrusion product maker, plans to raise as much as $1.6 billion on the Hong Kong Stock Exchange in an IPO that will potentially be the largest in the world so far this year. Strong stock performances in the Hong Kong and China markets since late last year have raised the hope that investor appetite might have returned to support such a large IPO. From its low in November, the Hong Kong Hang Seng Index has rebounded by 24%, while the Chinese A-share market went up by nearly 45% during the same period.

As market sentiment improves, there are clear signs that Chinese investors may once again show interest in new stock offerings. After an extended absence of new IPOs on the Chinese stock market, some news reports have emerged to indicate that Chinese regulators may consider allowing new companies to raise capital through IPOs again in the second half of 2009. Meanwhile, the regulators are busy drawing up policies for a new stock exchange based in Shenzhen, specifically for small-growth companies that can't qualify to trade on the main board. In other words, China's equivalent of Nasdaq is taking shape and may be in business before the end of 2009.

Dan Su does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.