Chinese Financial Stocks Surge on Beijing's IPO Reforms

China's securities regulator announced over the weekend that it would repeal the 13-month freeze on initial public offerings in January.

The news led to a rally in financial stocks as market players bet that IPO reforms would boost fees for brokerages and improve banks' funding.

Citic Securities, China's largest brokerage firm by market value, shot up 9.98% in Hong Kong trading to finish at HK$21.60, valuing the firm at about HK$237.97bn (£19bn, €23bn, $31bn).

China Merchants Securities jumped 9.96% in Shanghai trading to finish at 12.03 yuan.

Ping An Insurance, the nation's second-biggest insurer, added 4.2% in Hong Kong.

China Life Insurance, the nation's largest, finished 2.8% higher in Hong Kong.

Hong Kong's Hang Seng index finished 0.66% higher while the benchmark Shanghai Composite index finished 0.59% lower.

Banks stand to benefit from a "safer and more stable" capital base while insurers would gain new investment opportunities from the sale of preference shares, according to Zhang Yanbing, a Shanghai-based analyst at Zheshang Securities.

"Resuming IPOs will be a big boost to brokerages' investment banking business," Zhang told Bloomberg. "Some investors believe that China's stock market will enter a bull market soon."

Jiao Wenchao, a Beijing-based analyst at Ping An Securities said in a note to clients: "State-backed Citic Securities and China Merchants will probably be the main beneficiaries when new equity offerings resume, as IPOs they are managing account for the biggest share of the sales that are likely to come to market first".

Foreign investment banks such as Goldman Sachs are allowed to manage IPOs in China only when they sign joint ventures with local firms.

IPO Reforms

Under the new registration-based IPO system, China's Securities Regulatory Commission (CSRC) would be responsible to decide whether companies are fit for listing and will check disclosures to ensure they fulfill requirements, reported state-run CCTV.com.

The values and risks associated with a company's IPO would be for investors and the market to judge.

760 Firms Eye IPOs

In Shanghai, news that Beijing would revoke the year-long freeze on stock market listings weighed down on the benchmark index.

Over 760 companies are waiting to flood China's stock markets with their IPOs and experts said the addition of new stocks could siphon off liquidity from those being traded at present.