The new share frenzy, whipped up by the strong debut of the two relatively minor stocks after the lifting of the nine-month suspension in late June, is beginning to make an impact at the macro economic level.

Bankers and stock analysts said the increased demand for funds by investors to subscribe for corporate initial public offerings has spurred domestic interbank market interest rates.

Latest figures showed the benchmark seven-day repurchase rate, which measures funding availability in the interbank market, has gained four basis points, or 0.04 percentage point, since last Friday to 1.26 percent.

Stock analysts attributed the unusually large rate increase to the funding demands by investors, mainly institutions, who are keen on bidding for the 42.6 billion yuan IPO of China State Construction Engineering, the first mega issue to come to the market this year.

"Whenever there is a major IPO by a large enterprise, the interbank repurchase rate will fluctuate widely," said Lu Junlong, analyst, China Finance Online. "To some extent, higher interbank repurchase rate signaled that more capital was being diverted for subscription to new issues," he said.

So far, five companies have obtained approval from the China Securities Regulatory Commission (CSRC), to go public since the IPO market was resumed in June, including two large-cap stocks China State Construction and Sichuan Expressway Co.

Investors' pent up speculative interest in IPOs also led to an unusually high jump in the prices of two newly listed stocks. Guilin Sanjin Pharmaceutical Co and Zhejiang Wanma Cable Co both surged on their July 10 debuts.

According to the Shenzhen Stock Exchange, individual investors are the main buyers for the new shares on the first trading day.

"In 2008, about 56 percent of the investors who speculated on the newly listed stocks that debuted on the small- and medium-sized enterprise (SME) board in Shenzhen were individual investors and over half of them incurred losses after 20 trading sessions," said Song Liping, general manager of the Shenzhen bourse.

Besides the officials' warning, the individual investors have also been affected by speculation frustrations.

"I don't subscribe or speculate in new shares now, since I have felt the pain of speculation by buying PetroChina shares on its first trading day," said Zhu Hongbin, an individual investor with over 10-years experience in investment.

PetroChina Co Ltd got listed on the A-share market in late 2007, and was a nightmare for many investors. With an opening price of 48.6 yuan, the scrip began to fall soon and its current price is around 15 yuan, still below its issue price.

In many cases, bids for new issues were in excess of their underlying value. The chances for individual investors to subscribe the new shares are increasing after the new listing mechanism was reformed, but still hovers at a low level.

"The ratio of allocation to subscription is just around 0.1 percent, similar to the lottery. If you are lucky enough, you may get the new shares from subscription. I prefer to analyze the stocks and invest selectively," said Zhu.

(China Daily July 15, 2009)