The price of Beijing Tong Ren Tang Chinese Medicine shares more than doubled on its debut in Hong Kong. The Chinese drug distribution and manufacturing company, a spin-off of Tong Ren Tang Technologies, shot up 137% within a couple of hours of trading. It closed the day slightly lower but still up 115% over its offer price. “The company has laid out a bold expansion plan for the European market, which is set to be its next growth driver after achieving a meaningful presence in Asia,” Beijing Tong Ren Tang Chief Executive Ding Yongling said. The company planned to spend about HKD100 million on store expansion in its new markets, including Britain and Poland. In the latter, the company would set up a cultural center to promote Chinese medicine culture. Tong Ren Tang’s inventory rose to HKD87.2 million last year, from HKD62.1 million in 2011, while the rate of turnover slid to 206 days from 222. Chief Financial Officer (CFO) Lin Man said the increase was the result of a change of accounting procedures and the rising prices of raw materials. Beijing Tong Ren Tong raised HKD570 million by selling 200 million new shares, half of which were subscribed by 11 shareholders from Tong Ren Tang Technologies. Beijing Tong Ren Tang’s strong performance came as a surprise after a slew of uninspiring debuts by small companies on the exchange. Its opening performance was ranked the third best on the Growth Enterprise Market (GEM), an alternative fund-raising platform focused on start-ups, after Tom.com and Hongkong.com at the height of the internet bubble in 2000. Bankers have pinned high hopes on the coming listings of Sinopec Engineering and China Galaxy Securities, the South China Morning Post reports.

In a setback a day after the IPO, the Hong Kong health authorities unexpectedly issued a statement ordering Tong Ren Tang Hong Kong Medicine Management (TRTHK) to recall a batch of branded Chinese medicine that was found to contain excessive levels of mercury. Nevertheless, the share price of TRTCM continued to rally on May 8, partly thanks to support from some major institutional investors. Analysts said TRTHK and TRTCM are two different companies. The assets of the newly-listed TRTCM do not include the shops that TRTHK is running in Hong Kong and from which some Hong Kong consumers bought the Chinese medicine product that is now being recalled. From a financial and investment perspective, there is a clear difference between TRTCM and TRTHK. But for ordinary consumers, there is hardly a difference as the brand is the same.

Sinopec Engineering (Group), a unit of Asia’s largest oil refiner Sinopec, and brokerage China Galaxy Securities, launched Hong Kong IPOs on May 6 seeking to raise up to USD3.5 billion in total, injecting life into Asia’s moribund IPO markets where deal values more than halved in the first quarter of this year. The massive initial public offerings have been eagerly anticipated in Hong Kong and their success could trigger a wave of other deals, ranging from hotel operators to banks looking to sell new shares in coming months. With a value of up to HKD17.4 billion, Sinopec Engineering’s IPO would be Hong Kong’s largest since the People’s Insurance Co (Group) of China raised USD3.56 billion in late November. The offer values Sinopec Engineering at 9 to 12 times its forecast earnings in 2013. China Galaxy Securities, whose larger rivals include CITIC Securities and Haitong Securities, is offering about 1.5 billion shares in an indicative range of HKD4.99 to HKD6.77 each. IPO issuance in Asia excluding Japan plunged 56% to USD3.3 billion in the first quarter, making it the worst start to a year for new share listings since the first quarter of 2009, according to Thomson Reuters data. IPOs in Hong Kong are down 20% so far in 2013 from the same period of 2012 to USD1.05 billion. The two deals rank as Asia’s biggest IPOs this year, the South China Morning Post reports.

The China Securities Regulatory Commission (CSRC) announced it was in talks with international index compilers to join the global investment system, but market watchers said it was vital that current investment quotas for its Qualified Foreign Institutional Investor (QFII) and Renminbi Foreign Institutional Investor (RQFII) schemes be raised. The integration proposal is still at the discussion stage, and the main issues yet to be resolved focus on foreign exchange controls and possible fiscal taxation adjustments. One of CSRC’s potential cooperative targets is MSCI, a public company listed on the New York Stock Exchange. “If the MSCI index anchors China’s A shares, over CNY1 trillion worth of funds could roll in the mainland stock market. MSCI has more than 7,500 clients, mostly global pension funds and boutique hedge funds, and the joining of Chinese mainland shares could attract large inflows of exchange traded funds, and bring liquidity to the market. According to an insider, the biggest obstacle between the two sides reaching agreement had been China’s closed capital account. Currently the only way to invest in the Chinese stock market is to apply for a quota under the QFII scheme. Zhao Xiaoyun, Chairman of Global Trend Investment Management Co said: “In order to attract more international funds to buy A shares, QFII quotas and the series of investment limitations should be broken down.” By the end of March, the SAFE had an approved total quota of USD41.7 billion for 197 foreign institutions. The approved RQFII quota was CNY70 billion at the end of March, the China Daily reports.

Slightly more than half of A-share listed companies reported a positive outlook in their first quarter reports and many others are burdened by large inventories and sluggish demand. Analysts said the outlook is likely to remain uncertain for A-share companies in the first half of 2013. Companies in the retail, machinery and construction materials sectors posted the least positive performances and made the most guarded forecasts for the next quarters. Automobile, domestic appliance and realty companies made the brightest forecasts, amid hopes that sales may recover in the second half of the year. “Market performance was surprisingly lower than expectations. In some sectors, including realty and retail, the recovery has been soft,” said Guo Lei, Analyst at Zheshang Securities Co. As many as 359, or some 40% of the 904 companies listed in Shanghai or Shenzhen that had released first quarter reports by April 22, said their performance was not as good as in the previous quarter. Ninety companies reported first quarter losses, according to Shanghai-based financial information services provider Wind Information Co. The outlook for the next few months is no brighter, with 414 companies forecasting either a decline in profits or falling into the red. The combined value of the inventories of A-share listed companies more than doubled from CNY1.94 trillion in 2009 to CNY3.91 trillion by the end of 2012, according to financial data service iFind. “A booming stock market in China requires reforms of the mechanism for initial public offerings (IPOs), and more funds to be injected into the A-share market to increase its liquidity. Otherwise, little will be improved in the A-share market,” said Zhang Qi, Analyst at Haitong Securities.

Stocks in Shanghai jumped by the most in a month last week  onreports that China’s securities regulator has restarted issuing investment quota to foreign institutional investors after suspending them in February and March. The index gained 1.72% for the week. With an untapped quota of CNY200 billion, analysts said the approvals will help boost market liquidity. Chinese regulators are also considering adding A shares to the MSCI Emerging Markets Index, which could bring about CNY1 trillion into the domestic stock market.