After almost a year when the regulator in China stopped reviewing applications for listing on the country’s stock exchanges in Shanghai and Shenzhen, as it was worried about a flood of new shares could hurt investor confidence, the country’s securities regulator issued a reform plan for initial public offerings.
According to reports the new plan is on the part of the government is intended to prepare to lift a more than one-year freeze on new listings in the world’s second-biggest economy. The new efforts are being spearheaded by Xiao Gang, a former central banker and Bank of China Ltd. chairman who is now heading the CSRC.
Xiao Gang says that the shift to a looser IPO system must be gradual to avoid shocks to the market. The year has not been good for China’s benchmark Shanghai Composite Index (SHCOMP) as it slid 2.1 percent. The similar trend has been seen in the CSI300 Index which fell 3.3 percent this year.
Expected Expansion Plan to Include More than 50 Companies
As the government is mulling a new plan to expand its IPO approval the next year, more than 50 companies are expected to complete the IPO approval preparations. The reports published in local newspapers claim that the China Securities Regulatory Commission is admitting that companies will be added to the list or be ready to do so by the end of January.
In its statement the China Securities Regulatory Commission said that there are more than 760 companies in the queue for approval and it will take about a year to complete an audit of all the applications. China is in great need of funds, the country the world’s largest IPO market in 2010, with a record $71 billion raised, hasn’t had an IPO since October 2012.
New Rules for IPO to Curb Misappropriation
Though the country is mulling a plan to expand its IPO market the next year, it is keeping regulations at place to curb misappropriation. For instance, the new rules still impose requirements and threaten penalties on IPO advisers in an effort to curb misconduct in first-time share sales.
Earlier this year, the regulatory agency penalized several companies for non-compliance of the laws. The statement issued by China Securities Regulatory Commission says that it wants to emphasize that the market should not see the registration system as a sign that the government won’t supervise and regulate the market anymore.
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