Shares in Ping An Insurance opened sharply higher on Thursday after shareholders approved the company's plan for an equity issue that could raise some $17 billion.
The shares, which are down from just under 100 yuan in mid-January, were up 1.34 percent at 68.00 yuan after five minutes of trade on Thursday.
Traders said the market remained worried about its ability to absorb Ping An's huge issue, and by the prospect that Ping An's plan could prompt other big firms to follow suit with cash calls.
Many analysts, however, said both Ping An shares and the overall market might have little room to fall further in the short term at least, because they had already dropped so steeply since the announcement of the fund-raising in mid-January.
Also, Ping An's issue still needs approval by the securities regulator, which has warned companies against large fund-raisings that could hurt the market. Investors believe it may delay or force a moderate reduction of the equity sale.
On Wednesday, Ping An shareholders approved its plan for an offer of new shares and convertible bonds that could raise about $17 billion, official Chinese media said.
The approval came at a meeting of the second-largest Chinese life insurer's shareholders in the southern boomtown of Shenzhen, reported www.p5w.net, the Web site of Shenzhen's official Securities Times.
Ping An's planned issue of up to 1.2 billion new domestic A shares, or 16 percent of its current share capital, plus convertible bonds with warrants could raise some $17 billion at the last market price of its A shares, making it the world's sixth-largest corporate fund-raising.
The issue still needs the approval of the China Securities Regulatory Commission. Last week the regulator issued a public warning against large, "malicious" fund-raisings that could hurt the market, so many analysts think Ping An's plan may be delayed or scaled back.
"We're going to scrutinize very rigorously Ping An's proposal in accordance with all the relevant rules on secondary capital raisings," the commission's vice chairman Fan Fuchun told Reuters on Wednesday.
The fast-growing insurer says it needs the money to boost its capital and invest at home and abroad, but has declined to give details of its investment plans or the mechanics of the offer.
The price of its local-currency A shares has plunged 32 percent since it announced the offer in mid-January, as investors worry about the dilution to earnings per share and the market's ability to absorb such a big issue.
The overall Chinese stock market has also tumbled because of fears that Ping An's offer could encourage other big companies, particularly banks, to make large cash calls. The benchmark Shanghai index is 30 percent below October's record peak.
In January, shares in Prudential, Britain's second-largest insurer, jumped 14 percent on speculation that Ping An might buy a big stake in it with proceeds of the offer.
The speculation was not confirmed, but Prudential shares surged on Wednesday after news of the Ping An shareholder vote, and were up nearly 6 percent in morning trade in London.