Chinese authorities should consider loosening their grip on initial public offerings (IPOs) to help ramp up share supply amid the current bullish market sentiment, columnist Luk Man wrote in the Hong Kong Economic Journal Tuesday.
Authorities must speed up approvals for new listings and ease the tight restrictions on entities seeking to go public, he wrote.
Such move will enable companies to reduce their dependence on financial institutions for capital needs, and will also be good for promoting market-based interest rates.
Meanwhile, increased new-share supply will expand the investor base and bring in foreign and institutional investors, he wrote.
How to take advantage of the current A-shares rally to tackle the economic slowdown in China will be one of the biggest challenges facing President Xi Jinping and Premier Li Keqiang, the columnist wrote.
Sectors like banks, insurance, airlines, brokerages, high-speed railway and infrastructure and nuclear power plays will continue to outperform the benchmark index following their stellar performance last month, he wrote.
Financial stocks have performed “extremely well” in last five trading days, which prompted many investors to switch their bets from other sectors including Macau gaming, internet technology, and national policy-related stocks.
Mainland brokerages have star performers, hitting year-to-date highs across the board on Monday. And Hong Kong local brokers have also benefited. Emperor Capital (00717.HK) has seen its share price nearly double, while Bright Smart (01428.HK) and Tanrich (00812.HK) also hit new highs.
Investors should pay attention to sectors that will benefit from policy incentives. Beijing has pledged to invest a huge amount on infrastructure. Meanwhile, the rumored merger of the nation’s top train-makers, China CNR Corp (06199.HK) and CSR Corp (01766.HK), will help export excessive capacity in the industry.
Moreover, more free-trade zones will be given the go-ahead in the future, which could provide a catalyst for ports, trading and financial plays. Other sectors exposed to policy changes — such as new energy, nuclear power, urbanization, technology & innovation — and taxation reform may also bring some surprises.
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