BEIJING, April 18 -- The stock regulator said it would soon allow firms to resume raising capital on domestic stock exchanges, ending a year-long ban and paving the way for firms like Air China, which want to list at home, to return to domestic stock exchanges.

    The sequence for the resumption would be private placements, rights shares and then initial public offerings (IPOs), the China Securities Regulatory Commission said in a statement published on its Web site yesterday.

    "Major companies have been looking forward to listing on domestic exchanges, and local investors have long hoped to buy into them to enjoy part of China's economic boom," said Zheng Weigang, senior stock analyst at Shanghai Securities.

    "Still, there are worries that the domestic markets could be flooded with new shares. So a welcome for the news is measured."

    Mainland investors have complained that they are deprived of the right to enjoy part of the outcome of China¡¯s racing economy, which grew 10.2 percent in the first quarter from a year earlier, because for years quality firms have flocked to more transparent, liquid markets both abroad and in Hong Kong.

    Hong Kong, a Special Administrative Region of China with a financial framework separate from that of the mainland, is the listing home of Air China and other top mainland firms.

    After the news, the benchmark stock index rose 0.85 percent to 1,371.091 points by the midday break. The index has now jumped 25 percent since Dec. 1 last year and hovers near its highest level in 18 months, buoyed by strong technical buying after a four-year market slump. The slump was triggered by fears of a possible deluge of new shares from the proposed flotation of government holdings in listed companies.

    Now the regulator said those reforms, to convert US$250 billion in nontraded State shares in listed companies into regular traded shares, had seen some success, and it was the right time to lift the May 2005 ban on fund raising that was designed to support the program.

    Analysts said that fund raising could resume as early as next week, as the regulator had sent market players a set of rules on the resumption to seek their opinions, asking for feedback before Saturday.

    Brokers estimate an IPO resumption could flood the markets with at least 100 billion yuan (US$12.5 billion) worth of new shares in a few months, though the amount of private placements and rights shares could be limited.

    Industry leaders, including top oil firm PetroChina Corp., top alumina producer Aluminum Corp. of China Ltd. and Bank of Communications, have plans to list yuan-denominated A shares on the Shanghai Stock Exchange.

    Top wireless carrier China Mobile (Hong Kong) Ltd. and offshore oil producer CNOOC Ltd. are among firms considering raising cash via Chinese Depositary Receipts (CDRs), modelled after American Depositary Receipts.

    But analysts said Air China Co., the country's most valuable airline, was likely to be first because it planned to sell stocks through private placements.

    Air China, Asia-Pacific's sixth-biggest airline by market value, said in February it would issue up to 2.7 billion A shares to qualified investors, which include foreign banks such as HSBC Holdings Plc. and Morgan Stanley.

    The regulator said yesterday the government would require companies to launch new IPOs to make all outstanding shares freely traded.

    "There will be no difference between traded and nontraded shares in firms launching IPOs from now on,"it said.

    To quell possible jitters from a flood of new shares, the government could raise quotas to Qualified Foreign Institutional Investors (QFII), the regulator said.

    (Source: Shenzhen Daily/Agencies)