(Yicai) Aug. 28 -- China’s securities watchdog said it will tighten initial public offerings and refinancing, lower margin financing requirements, and further limit some shareholding reductions after the finance ministry halved stamp duty on stock trading, aiming to lift the market by fortifying investor confidence.

“Taking into full consideration the current market situation, the China Securities Regulatory Commission made arrangements to refine the counter-cyclical adjustment mechanism of the primary and secondary markets, based on the reasonable pacing of IPOs and refinancing,” it said in a notice posted online yesterday.

The pace of IPOs will be tentatively tightened based on the recent market situation to promote the dynamic balance between investment and financing, the CSRC said.

“Listed firms will be strictly required to spend the [IPO] proceeds on their main businesses, with strict restrictions on diversified investment,” it noted.

The CSRC also noted that the refinancing efforts of listed real estate developers will not be hindered by their shares falling below the offering price, or below net asset value per share, or by huge losses.

A pre-communication mechanism will be set up for the large-scale refinancing of listed firms in the financial or other large-market cap sectors, with attention paid to the need for the refinancing and its timing, the regulator pointed out.

Besides limiting IPOs and refinancing, China's three major stock exchanges in Shanghai, Beijing, and Shenzhen will drop the pledge ratio on margin financing to 80 percent from 100 percent after the bourses close on Sept. 8.

The balance of exchange margin trading was CNY1.57 trillion (USD215.4 billion) as of Aug. 24, with the pledge ratio remaining high, according to reports. A moderate easing based on the overall controllability of leverage risks will help the securities margin trading business and boost existing funds, in the opinion of regulators.

The CSRC will also further regulate share reductions by certain shareholders. Controlling shareholders or actual controllers cannot shrink their holdings via the secondary market if the listed firms have fallen below their initial offering prices or net asset value per share or have not received cash dividends in the past three years and the dividend total is less than 30 percent of the average annual net profit in the period, it added.

“The policy measures will more effectively achieve the aim of ‘activating the capital market and boosting investor confidence,’” said Liu Xinqi, chief non-bank analyst at Guotai Junan Securities.

The policies will help attract new mid- and long-term funds to the market while tightening IPOs and restricting related parties' equity sales, better promoting the investment and financing balance in the capital market, according to Liu. They will boost the appeal of the capital market, attract new funds, and benefit listed brokers, he pointed out.

Editors: Liao Shumin, Martin Kadiev