China's onshore stock market had its busiest day for initial public offerings (IPOs) in 16 months, with 10 companies rallied by at least 48 per cent on their first day of trading in Shanghai and Shenzhen.

The 10 firms represented the first batch of mainboard listings approved under a registration-based mechanism. It marked the most number of stock debuts on a single day since November 15, 2021, when the Beijing stock exchange commenced operations with 10 new listings.

Five companies including Citic Metal and Zhongzhong Science and Technology debuted on the Shanghai Stock Exchange, while power generator Shaanxi Energy Investment joined four others on the Shenzhen bourse.

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China decided in February to review all IPOs through a new system that evaluates listing applicants on the quality of information disclosure, instead of their growth prospects. As part of a reform of the country's three-decade-old stock markets, the overhaul removed a cap on IPO valuations and the market price during the first five days of trading. A 10 per cent daily limit on either side is imposed after that.

"The registration-based system will reduce direct interference from the government, and be helpful in boosting the efficiency of resource allocation," said Liu Min, an analyst at Chasing Securities. "It will increase support from the stock market to the economy by widening fundraising access for small and medium-sized companies and streamlining approval processes."

Shenzhen CECport Technologies, which makes electronic components, rallied 222 per cent to 38.20 yuan and Dencare Oral Care surged 174 per cent to 56.64 yuan, making them the best performers among the lot. Shaanxi Energy jumped 48 per cent to 14.20 yuan. The trio are listed in Shenzhen.

The 10 companies raised a combined 21.2 billion yuan (US$3.1 billion) from the offerings, with Shaanxi Energy raking in 7.2 billion yuan from the biggest of the 10 IPOs. Nine of them sold their shares at more than 23 times earnings, a cap previously set by the securities regulator to make sure no IPOs flopped, according to data by Eastmoney.com.

Citic Metal, a commodity trader backed by state conglomerate Citic Group, was the only firm to price its stock below 23 times, offering new shares at a multiple of 20.2 times, data shows. Shaanxi Energy priced its IPO at 90.6 times, the highest among the 10 new offerings.

Jiangsu Evergreen New Material Technology, a maker of chemical products, drew the most enthusiastic response from investors, who ordered 3,690 times the stocks on offer. The stock closed 72 per cent higher at 44.60 yuan in Shanghai. Shaanxi Energy was the least sought-after, with an oversubscription rate of 125 times, Eastmoney.com data shows.

Traders have returned to the market after some leading indicators showed that China's post-Covid economic recovery was under way, driving up trading volume. This month, more than 1 trillion yuan worth of stocks changed hands daily in Shanghai and Shenzhen combined, prompting Yingda Securities to predict an imminent bull run.

The Shanghai Composite Index had risen 15 per cent from an October low through Friday. A gain of 20 per cent is regarded by some technical traders as a bull market.

Before this week, 55 companies have completed their IPOs on the Shanghai and Shenzhen exchanges this year.

The best performer was MLOPTIC, a maker of optical components that surged 175 per cent in Shanghai on March 9. The worst performer was Hangzhou Guotai Environment Protection Technology, which slumped 13 per cent in Shenzhen on April 4, according to Bloomberg data.

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This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.

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