A SPATE of initial public offerings (IPOs) in China could lock up some 3 trillion yuan (US$483.19 billion) worth of subscription capital next week, analysts estimate, reducing liquidity in a market already under regulatory scrutiny over leveraged bets.

    While the 20 companies whose IPOs were approved by the securities regulator late Friday only aim to raise around 200 million yuan, according to analysts’ estimates, the lottery-like subscription process attracts vast amount of money due to the potential for massive profits if the share price rockets after an IPO’s launch.

    IPO subscriptions typically divert funds away from listed shares, putting pressure on the secondary market.

    It is the second batch of IPOs approved in less than a month, signalling regulators’ intention to cool a red-hot market by increasing the supply of shares.

    “Regulators have said they would accelerate IPO approvals and we’re seeing it happen,” said Zhang Chen, analyst at Shanghai-based hedge fund manger Hongyi Investment.

    Cao Xuefeng, analyst at Huaxi Securities in Chengdu, also expected the coming round of IPOs would put around 2.5-3 trillion yuan on ice for a few days.

    Zhang Guangwen, analyst at investment advisory firm Guangzheng Hang Seng also reckoned about 3 trillion yuan could be locked up by the subscriptions.

    The far smaller actual amount that the IPOs will fetch won’t have a lasting impact on market liquidity, but it could have psychological impact as regulators are clamping down on speculative activity by reducing leverage in stock trading, said Zhang from Guangzheng Hang Seng.

    Shanghai-based budget airliner Juneyao Airlines is among the companies that will launch IPOs next week. Its prospectus says it plans to raise up to 6.8 million yuan.

    Investors are lured by huge gains of newly-listed shares. For example, Beijing Baofeng Tech debuted March 24 at a market cap of about US$200 million, but it is now worth US$3.3 billion with the stock rising by a limit-up 10 percent on 32 of the 33 days it has been a public firm.

    Chinese regulators have historically closely managed the pace of IPO issuances, given their tendency to drag down the market if they come too close together, draining net liquidity.

    Regulators have often seen fit to freeze IPOs during market slides. Now that markets are rallying strongly, however, there is more liquidity available in the market than new issuers and secondary issuers can tap. (SD-Agencies)