By Liu Ming
Recently, Wang Zhiyuan, who positioned himself as a prudent investor, modified his family financing plan, and the most important change is to use current deposit to purchase new shares. He believed that to apply for purchasing new share, the capital will not be occupied for a long time, and the income is stable with lower risk, so it belongs to "the optimization for current deposit".
With the reopen of new share offering, there exist many people having modified their financing plan, just like Wang Zhiyuan. For them, to reset the issue of new share maybe only an addition to investment ways, but for those numerous enterprises, what the reopen of new share issuance brings is a long-waited direct financing channel.
Along with the successful list of such companies as Guilin Sanjin Pharmaceutical Co., Limited, Zhejiang Wanma Cable Co., Ltd., Sichuan Chengyu Expressway Company Limited, Joindoor Hypermarket Co., Ltd. and China State Construction Engineering Corporation, the "refueling pipeline" between capital market and real economy has been opened.
The statistics showed that up to 31 July, there have been 31 companies that intends to go public having been approved and waiting to list in A-share market, and the scheduled capital stock to be issued totals to 3.571 billion shares, among which, China Shipbuilding Industry Corp. will issue most shares with the amount of 1.995 billion shares; besides this company, the companies planning to issue over 100 million shares include such companies as China Merchants Securities and China International Travel Service Limited (CITS); and among the line of companies waiting to list, Hangzhou New Century Information Technology Co., Ltd plans to issue 13.5 million shares, which is the least amount.
Provide a long-term support for enterprise development
"Real valuable enterprises can be very popular with investors only by getting through channels and injecting into fresh blood for share investment taking advantage of capital market, so as to address the problem on mid and small-sized enterprises' financing bottleneck." Li Wanshou, President of Shenzhen Capital Group Co., Ltd, believed that IPO re-initiation would play an important role in boosting the development of real economy.
Market researchers reckons that the trend of the investment market is always ahead of the real economy, the current rising in the stock market is a logical reflection of economy recovery, but the activity in the investment market is based on the recovery of real economy after all. In the present rising market, to improve the efficiency of direct financing by means of measures like expediting new share issuance will benefits consolidating the basis of real economy recovery.
Jing Linbo, Assistant Head of Institute of Financing and Trade Economics, Chinese Academy of Social Sciences, believes that to provide fund for enterprises is a direct function of renewing new share issuance, which will exert an active effect on promoting the recovery of enterprises' real industrial investment.
He expresses that the capital market is a powerful leverage on realizing reasonable resource allocation, as well as an important media in direct financing, which will deliver limited monetary capital element to different areas, industries and companies, so as to obtain the maximum capital benefits. At the same time, enterprises can reallocate resource in the stock market, i.e. through such manners as acquisition and merger to realize the optimization of resource allocation and industrial upgrade, as well as industrial integration.
Li Wanshou believes that compared with the simplex deal in Class II stock market, the recovery of financing function will enable the capital held by investors be transferred to business entities through IPO, re-financing, or bond issuance, which will provide capital for enterprises' industrial investment, and the opening of direct financing channel will increase the option of financing channels for list enterprises, which will facilitate enterprises to make investment decision.
Optimize enterprises' capital structure
Statistics showed that from 2001 to 2007, the ratios of the collection amount of domestic direct financing to the increased bank loan in the same period are 9.5 percent, 4.11 percent, 2.97 percent, 4.49 percent, 2.05 percent, 8.38 percent and 21.95 percent respectively. Although the situation in 2007 is special, that is, the proportion has broken through 20 percent, it is still lower than that in other developed countries. Jing Linbo reckons that the acceleration of new share issuance can improve enterprises' capital structure effectively.
"The badly illogical direct investment proportion and indirect investment proportion are dangerous. It has not been improved for recent years until in 2007, however, the bank credit has again hit the record valued more than RMB7 trillion yuan in the first half of this year. The overmuch dependence on bank loan in economic development also makes risks fasten on the banking system overmuch." Zhu Jianfang, Chief Macro-analyst in CITIC Securities Co. agreed with Jing Linbo's opinion.
"The bank loan has been always emphasizing particularly on mid and large-sized state-owned enterprises, while it is always difficult for those private enterprises, which are most active in the economy development, to obtain loans; moreover, for part of developing mid and small-sized enterprises, it may be more suitable to enable investors become shareholders and enterprise owners via shareholding financing than direct bank loans." Zhu Jianfang expresses that, "Nowadays, the market fluidity is abundant, and the acceleration of IPO will not pose stress on the long-term tendency in the market, but benefit the supply and compressing the market foam."
Jing Linbo believes that if take the relatively reasonable proportion of the capital market collection amount in the total social collection amount as a standard to measure, the fund-collection function of the capital market has not been exerted far away.
Data showed that, there were 123 companies selecting IPO in A-share market in 2007, including 23 main board companies in Shanghai Security Market and 100 small and medium-sized board companies in Shenzhen Security Market, and the total amount of the collected capital is about RMB459 billion yuan. But in 2008, there were only 77 companies making their IPOs in Shanghai Security Market or Shenzhen Security Market with the total collected capital valued RMB103.6 billion yuan.
Zhu Jianfang believed that with the greatly increased liability for enterprises, the effective follow of share capital financing can assist enterprises to balance their financial leverage effectively and lower financial risks.
