China Money: Taps open for corp bonds as IPOs frozen out

* Corp bond issuance surging in 2009, may nearly quadruple

* Issuance spurred by protracted halt to mainland IPOs

* IPOs may not resume until latter half of Q3 at earliest

* Govt also keen to boost scale of corp bond market

* New bond supply will help to put floor under yields

By Karen Yeung

SHANGHAI, May 21 (Reuters) - China's government has opened the taps for corporate bond issuance to help fill a fund-raising gap left by an eight-month halt in IPOs, reinforcing expectations the authorities will be cautious in resuming equity offers.

Markets have been speculating when an effective ban on mainland IPOs may be lifted, especially since the benchmark Shanghai Composite Index .SSEC is up 45 percent this year.

But an announcement this week by PetroChina (0857.HK) (601857.SS), Asia's top oil and gas producer, that it would issue 15 billion yuan ($2.20 billion) in five-year bills next week has added to evidence suggesting authorities may wait several months before resuming IPOs.

Analysts and dealers said the slew of corporate debt issues suggest authorities may wait until the latter half of the third quarter or later before resuming IPOs, to see if the economy's fragile recovery and the stock market's uptrend are sustainable.

The China Securities Regulatory Commission said in September it would control the frequency of IPOs, taken at the time as a sign of its concern that a weak stock market would not be able to absorb a heavy supply of equity.

"The authorities may want to avoid resuming big IPOs in the near term to avoid volatility in the stock market so corporations are issuing medium-term bills as well as bonds approved by NDRC," said Zhang Lei, bond analyst at Shenyin and Wanguo Securities, referring the top economic planning body.

AHEAD OF FORECAST

Apart from PetroChina, Baoshan Iron and Steel Co (600019.SS), China's top steelmaker, was also added to the list of firms raising debt. It plans to sell 5 billion yuan in three-year bills.

In the first four months of 2009, Chinese firms have issued a whopping 384.5 billion yuan in corporate bonds and bills of one year and above, against just 67.7 billion yuan a year earlier.

At the start of this year, market forecasts called for issuance of at least 600 billion yuan in such debt for the whole year, up from 440 billion yuan in 2008 and 183 billion in 2007.