(Corrects number of pending IPO applications in second paragraph)
SHANGHAI Dec 31 (Reuters) - China has approved five firms to list on mainland stock exchanges, ending a year-long freeze on initial public offerings (IPOs) as authorities look to reboot a reformed market in 2014.
The long-awaited move is a boon to the more than 750 companies whose IPO applications are pending with the regulator but will bring trepidation to equity investors, who fear that new listings will siphon off demand from existing shares.
"This is within expectations. It had to happen sooner or later. But regulators seem to be doing their best to minimize the negative impact on the market," said Yu Kai, chief analyst at Aerospace Securities in Shanghai.
"Today is the last day of the year, so institutional investors have an incentive to maintain their positions in order to protect their rankings, which are based on market value," he said.
The Shanghai Composite Index opened down 0.3 percent on Tuesday but was up by 0.1 percent by mid-morning. Still, it looked set for a 7.6 percent loss on the year.
Neway Valve Co Ltd, Truking Technology Ltd, Zhejiang Wolwo Pharma, Guangdong Qtong Education Co Ltd and Guangdong Xinbao Electrical Appliances Holdings Co Ltd have received official IPO approval, the five firms said in statements to mainland exchanges.
The IPO market has been frozen since authorities suspended listings in October 2012 to stamp out equity market fraud and restore confidence in domestic markets.
Yao noted that of the five, only Neway Valve will list in Shanghai, which hosts most of China's largest companies.
The other four will debut in Shenzhen, where smaller companies trade. The small size of these companies will limit overall market impact, he said.
But the securities regulator said last month that around 50 firms could complete the registration process in January.
EY, the accounting firm, has estimated this initial group could raise around 40 billion yuan ($6.6 billion), while fundraising could total 200 billion yuan overall in 2014.
China's leaders have said new IPOs will be more investor-driven, with the regulator focusing on ensuring adequate disclosure while leaving decisions about the viability of the business to investors. ($1 = 6.0618 Chinese yuan) (Reporting by Gabriel Wildau and Adam Jourdan; Editing by Michael Perry & Kim Coghill)