Although there were only 5 China IPOs since January through through June 2006, Daniel Gao, publisher and director of the China Securities Yearbook, views this year as a milestone for China's stock market. In this guest blog posting Gao reflects a renewed optimism about China's stock markets in a country that didn't recognize the right of businesses to sell shares until 1984. (editor's note.)

With the closing of China stock Equity Division Reform, senior management continues to test the timing and capability of re-opening IPOs. In the March of 2006, Shenzhen stock Index reached its highest point in two years. This action coupled in early April with the reforms in tradable A-shares of China Unicom has ushered in a major turning point in overall equity division reform and galvanized support for reopening IPOs.

Also, many venture capital companies have now changed their investment strategies to an IPO plan. On June 19th, Zhonggong Guoji became the first initial public offering since 2005.

Forecasting for the second half year

Two factors may impact on the speed up of the IPOs in the second half of the year. The first one is attributed to how the market will react to the IPOs. If there is a negative response to IPOS, the senior management will slow down the speed of the IPOs.

For example, since mid- July, some observers have found that China Securities Regulatory Commission has not renewed the notices about new issuance of stocks,and some financial observers believe that will result in pressure on any new offerings in the market.

The second factor is how much capital will flow into the stock market. According to some reports, this second half the demand for capital in the Chinese stock market will be over 3000 billion RMB. Through the issuance of Insurance capital and Social Insurance funds, their combined investment in China's stock market will total almost 1500 billion RMB.

Reasons for possible slowdown of China IPOS

The prevailing assumption among market watchers is that it will be necessary to slow down the speed of IPOs. According to China stock market analysts, China's stock market gatekeepers (CSRC) will only speed up the process for future IPOs to insure the overall stability of China stock market for the balance of the year.

1. China stock market has shifted from a bear market to a
bull market. This action is buttressed by the increased number of small investors in China.

2. Government bureaus released several positive correlative policies: a). new regulations and rules for listed companies issuing stocks; b). regulations and rules for first public stock offerings to improve the investment environment in the China stock market.

3. The success of the Bank of China's IPO added more credibility and stability to the rise of IPOs.

During the second half of this year, expect to see more state-owned enterprises attempt to list. Recent news releases suggest that the Industrial & Commercial Bank of China (ICBC) plans to go public on both the Hong Kong Stock Exchange and the China stock market before the end of the year, paving the way for the nation's largest lender to become the largest stock offering in China's brief history.