Qian Guoying has sold off her yuan-backed securities worth 300,000 yuan (US$3,73000) since the start of the month, as she waits to buy into a raft of initial public offerings that she deems potentially lucrative.
"After the recent rally, I decided to cash out and look forward to new shares," said Qian, a 58-year-old retired engineer, who has been investing in Chinese stocks for more than a decade.
"We now really miss IPOs very much and a supply shortage will likely push up the debut prices of newly issued shares, helping bring in easy money. Though the market is in a correction, I expect it to head up again when new blood of both equities and funds flows in."
Chinese mainland authorities last month restored first-time equity sales and secondary offerings after a one-year ban due to a nationwide shareholding reform of listed firms. Regulators hope to ride on mounting investor confidence to furnish the market with more new issues.
However, just as investors like Qian are stocking up funds to subscribe for new shares, the benchmark stock barometer in Shanghai has so far dived nearly 10 percent this month, after climbing about 40 percent since the end of last year.
Analysts and market watchers attributed the decline partly to profit-taking as investors judged the value of existing stocks had substantially recovered and the fact it had become harder to seek bargain hunting opportunities.
But they also noted both retail and institutional investors want to grab a piece of soon-to-be-launched IPOs, which will likely feature good-quality firms as regulators are expected to take cautious moves so as not to affect sentiment with possible misconduct and lax corporate governance.
"I believe the recent correction is short-lived," said Zhu Yan, a Bank of China manager who holds yuan-denominated stocks. "You may see some funds flow out for IPOs but eventually more funds will flood in to chase Chinese shares based on their fundamentals."
The mainland watchdog revised its stock market rules in May, raising profit criteria for listing applicants and decentralizing power to the two stock exchanges of vetting companies' proposals to go public, moves analysts view as hoping to enhance the quality of the market.
A total of 51 companies had unveiled plans to raise as much as 65 billion yuan by selling first-time shares or conducting secondary offerings after regulators lifted the stock-sale ban, the Securities Times reported last week, citing its own data analysis.
Bank of China, which just netted US$11.2 billion from its IPO in Hong Kong last month, plans to raise up to 20 billion yuan floating as many as 10 billion shares in Shanghai.
The stock sale, the biggest ever on Chinese mainland bourses, is set to be followed by a myriad of others, including that of Industrial & Commercial Bank of China, the country's biggest lender. The bank's president Yang Kaisheng said this month yuan-denominated A shares will land "soon" after ICBC's proposed Hong Kong IPO later this year.
Hong Kong-listed Air China Ltd, the mainland's flagship carrier, and PetroChina Ltd, the nation's largest oil company, both plan to sell A shares.
"The market needs large-sized share sales of companies that can reflect the sizzling growth of China's economy," said Wu Ke, a Zhongtian Investment Consulting Co analyst. "Surely these IPOs will be hotly pursued and authorities may encourage more institutional participation in the capital market as well as widening foreign investors' access to Chinese mainland securities."
Starting from scratch in early 1990s, Chinese mainland stocks hit dizzying valuations in 30001, but crashed to earth as widespread corruption and poor management in many of the firms crippled investor enthusiasm.
A four-year share slump has prompted regulators to tighten up and lengthen the review of listing candidates' applications, spurring a lot of firms to turn to overseas capital bourses such as those in Hong Kong and New York to raise funds for expansion.
The mainland stock exchanges, over the longer term, also plan to introduce a Chinese Depositary Receipt System, which would allow Hong Kong-incorporated firms to trade in Shanghai or Shenzhen in much the same way that American Depositary Receipts are traded in the United States.
Top cellular carrier China Mobile (Hong Kong) Ltd and offshore oil producer CNOOC Ltd are said to be among the firms pondering the issue of CDRs.