CSRC Slows IPO Approvals to Stiffen Stock Market
Du Qingqing
/SOURCE : Yicai
CSRC Slows IPO Approvals to Stiffen Stock Market

(Yicai Global) June 5 -- Following market drops, China's securities regulator decided to slacken the pace of initial public offering (IPO) reviews and approvals in a bid to put a floor in the stock market.

IPO review will slow but not stop, because re-launching IPO applications in future will entail more problems, an IPO review board inside source told Yicai Global.

New share issues on the A-share market are subject to the approval of CSRC's IPO review board.

The China Securities Regulatory Commission (CSRC) limited the number of weekly IPO approvals to seven on May 26, and only four companies appeared on the commission's IPO approval list released last Friday. Total IPO volume approved is projected to be no more than USD218 million (CNY1.5 billion).

Successive reductions in the number of IPO approvals show the CSRC's determination to bolster the stock market, said Wang Sheng, chief strategy analyst at SWS Research.

In contrast to last year, the pace of IPOs this year will see acceleration in the first several months followed by a slowdown in the second, a chief strategy analyst at a brokerage told our reporter.

Both the change in the pace of share issuance and tightened control over shareholding reductions by major shareholders seek to smooth out fluctuations in the market, and to avoid short selling caused by policy changes, he noted. 

The total IPO volume remained high in this year's first half, roughly tying the second half of last year. An aggregate of CNY184 billion was raised through 280 IPOs approved by CSRC last year, and some CNY142.5 billion was raised in the second half, statistics show. Between Jan. 1 and June 4, 199 IPOs generated nearly CNY100 billion.

The IPOs only had a limited 'blood drawing' effect on the market, a market insider opined, but stock indexes face considerable downside pressure as trading bans are lifted from major shareholders of listed companies and from large share issues through private placements in 2015 and last year.

Major A-share stock indexes have fallen sharply since early April, with the Growth Enterprise Market index particularly plummeting, weakening investor confidence for the future.

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Keywords: CSRC , REGULATION , IPO , FINANCING , A-Share Markets