Hong Kong, July 13: A slowing in the pace of red chip listings should boost the flow of liquidity into H-share issues by Chinese companies, helping their performance after some recent disappointing H-share listings, analysts said.

``It will help the response to H-share listings due to (greater) liquidity flow, especially with quite a number of H-shares seeking listings over the next few months,'' said Michael Ng, an analyst at ASG Capital.

Red chips -- shares of Hong Kong-based companies with financial backing from China -have been wildly popular with Hong Kong punters while H-shares -- China-incorporated companies listed in Hong Kong - have suffered from poor fundamentals.

China copper producer Jiangxi Copper Co Ltd disappointed investors last month when it ended its market debut in Hong Kong below its initial public offering (IPO) price due to concerns about its exposure to copper prices.

Jiangsu Expressway Co Ltd followed later in the month with an H-share IPO which similarly ended its first day of trading below its issue price. While the first H-share issues about four years ago were hundreds of times oversubscribed, that enthusiasm now seems to have swung to red chips.

But Chinese securities regulators have said they would impose tighter checks on red chip listings, and analysts expect a slowdown in the number of issues in the medium term.

``They may need more time to obtain all the necessary approval, and that may slow their pace of listing,'' said Lawrence Ang, head of China research at Deutsche Morgan Grenfell.

``But it is good for the future development of the market. Red chip speculation was really out of control.''

Angang New Steel Co Ltd was expected to become the first H-share to list following Hong Kong's July 1 return to Chinese rule. Market sources said the steel producer was due to issue 890 million H-shares, raising up to HK $1.75 billion ($226 million), in an IPO in Hong Kong later this week.

The shares were due to begin trading on July 24, they said.

China Southern Airlines was also expected to raise about HK$5.0 billion by issuing about 1.03 billion H-shares in a dual listing in Hong Kong and New York by the end of July, sources said.

Shangdong Yanzhou Mining and Anhui Xinji Energy were expected to list H-shares in Hong Kong later in 1997, they said.

Kinson Au, research manager at Asia Financial Securities, said that while future H-share listings may benefit from a slower pace of red chip offerings, they may not draw overwhelming investor response due to the poor performance of existing H-shares.

``The response to their offerings are fundamentals driven,''added Ang.

Although there may be fewer red chip issues coming up, tighter controls over their listings should boost investor confidence in the sector, analysts said.

``Procedures will gradually become clearer. It will help to increase investor confidence since red chip transparency is improving,'' said Hugo So, analyst at Yamaichi International. Market sources said at least 15 municipal and provincial government-backed firms were in preparatory work to seek listings in Hong Kong.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.