China markets regulators allows resumption of IPOs as stock market revives

Investors look at computer screens showing stock information at a brokerage house in Shanghai. Photo: Reuters

China’s securities regulator said on Friday it would allow the resumption of initial public offerings in China, lifting a suspension put into effect in July as regulators desperately tried to slow a devastating stock market crash.

China Securities Regulatory Commission (CSRC) spokesman Deng Ge made the announcement at a weekly news conference in Beijing.

The CSRC said that 28 companies which had seen their already-approved listings halted by the freeze would be the first out of the gate, adding they have two weeks to prepare for the resumption, with the first batch of 10 companies launching after November 20.

The announcement comes after signs Chinese stock markets have finally stabilised after a rocky summer; this week the CSI300 index posted its best weekly performance since June.

Mainland stock indexes are up by more than 20 percent from the bottom of a crash struck in August, technically marking a return to a bull market.

“This is a good news for the stock market in the mid-to-long term as it will introduce fresh cash though it will also bring some psychological pressure to investors as they are afraid of diversion of the cash in the short term,” said Xiao Shijun, an analyst at Guodu Securities in Beijing.

The stock market crash over the summer was partly blamed on a spate of IPOs hitting an already frothy and heavily leveraged market.

Companies in mainland China had raised $23.4 billion in IPOs in 2015 through mid June before regulators suspended deals, far surpassing the $13.2 billion in all of 2014, Thomson Reuters data showed.

At one point the CSRC was letting 40 companies list every week and there were even more secondary issuances.

“I don’t think the resumption will cause a market stampede again,” said Xiao. “In June, the fundamentals were distorted by high leverage, which does not quite exist in the current market after regulator’s aggressive moves.”

Policy Problems

Zhang Qi, an analyst at Haitong Securities in Shanghai, said he expected retail investors to be skeptical of how much they will benefit from the resumption of IPOs, which were highly distorted by pricing restrictions and other policies.

“I am also expecting further changes to IPO rules, including to the quota for major stakeholders share of subscriptions.”

The CSRC has said it would migrate away from its current approval system for IPOs to system in which companies merely register to list without requiring regulatory clearance.

However, rules aimed at preventing insiders from fleecing investors suppressed IPO pricing, unintentionally creating an easy profit for those investors able to subscribe.

Nearly every listing in China rose by the maximum allowable 44 percent on the first day, and most went on to rise into triple digits in the following weeks.

As a result, IPOs went oversusbcribed by an average of 130 times, and the escrowing of cash by aspiring subscribers temporarily sucked trillions out of the money markets and distorted interest rates.

(Additional reporting by Lu Jianxin in SHANGHAI, Winni Zhou and Meng Meng in BEIJING; and Elzio Barreto in HONG KONG; Writing by Kazunori Takada and Pete Sweeney; Editing by Jacqueline Wong and Simon Cameron-Moore)

Reuters

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.