(Yicai Global) Oct. 24 -- China Energy Engineering and Dongbai Group set out plans to raise funds through private placements of shares after China’s securities watchdog relaxed the regulations that govern fundraising by some listed companies with real estate businesses.

China Energy Engineering, a new-energy infrastructure giant listed in Shanghai and Hong Kong, said yesterday that it is mulling a private placement of A-shares, those traded in the mainland, to raise CNY15 billion (USD2.1 billion). Shanghai-listed commercial retail and logistics services provider Dongbai announced plans the same day to raise CNY1 billion (USD138 million).

The China Securities Regulatory Commission introduced a new policy last week to allow listed non-real estate companies whose businesses also include property to raise funds on the Shanghai and Shenzhen markets, provided that the proceeds are not used by their real estate businesses. It also established that profit and revenue at the property divisions of those intending to raise money should not account for more than 10 percent of their annual total.

The move will maintain the market’s fundraising function, spurring the development of listed companies and the economy, according to the established principle that “housing is for living, not for speculation,” said Tian Lihui, dean of Nankai University’s Institute of Finance and Development. 

China Energy Engineering aims to invest the proceeds of its fundraiser into photovoltaic, wind power, hydrogen, energy storage, and other new energy projects, it noted. Dongbai said funds would be used to supplement working capital, repay bank loans, and go on warehousing and logistics.

China Energy Engineering’s revenue from its real estate business accounted for 4.8 percent of its total last year and 3.8 percent in the first half of this year. The commercial property business of Dongbai contributed 3.3 percent and 1.2 percent to the company’s overall income last year and in the first six months of 2022, respectively. Both firms meet the CSRC’s latest requirements.

China Energy Engineering [SHA: 601868] fell 0.9 percent to CNY2.31 (32 US cents) in Shanghai today. Its Hong Kong-listed stock [HKG: 3996] dropped 3.5 percent 82 Hong Kong cents (10 US cents). Dongbai [SHA: 600693] sank 5.6 percent to CNY4.08.

A private placement, in which additional stock is issued to specific investors to raise funds, dilutes the number of a listed company’s outstanding shares, often leading to a short-term decline in the stock price.

Editors: Tang Shihua, Futura Costaglione