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Friday 12 June 2009
China to allow resumption of IPOs, sets new rules
China’s securities regulator is allowing initial public offerings (IPOs) to resume after a nine- month hiatus after setting new rules that are expected to improve the odds for smaller investors.
(SHANGHAI) China’s securities regulator is allowing initial public offerings (IPOs) to resume after a nine- month hiatus after setting new rules that are expected to improve the odds for smaller investors.
Shares rose yesterday after the China Securities Regulatory Commission (CSRC) issued the new guidelines following several weeks of public consultation.
Chinese investors have usually tended to react negatively to news of new IPOs, expecting them to flood the market with shares that might push prices lower.
But ample funds and optimism over the potential for an economic recovery have helped shore up share prices in recent weeks.
‘It’s just a short-term fluctuation. In my opinion, the plan to resume IPOs will have little impact on the market’s performance,’ said Wei Daoke, an analyst at Shenyin Wanguo Securities in Shanghai.
‘I think liquidity is still adequate for the long-term, and the market trend is upward,’ Mr. Wei added.
The benchmark Shanghai Composite Index edged lower yesterday, slipping 0.3 per cent to 2,807.02 points. On Wednesday, before the rules were issued, the index closed at a 10-month high.
The new IPO regime is meant to ensure better opportunities and protection for retail investors, who often have been virtually shut out of major IPOs by big institutional investors who would win the lion’s share of subscriptions, state media cited commission officials in Beijing as saying.
Big investors will be limited to one stock investment account for buying newly issued shares, rather than the numerous ones they could use to obtain new shares if they had more than five million yuan (S$1 million) in capital, the CSRC said in a notice posted on its website.
All stock investors have to subscribe to new share issues using either an online or off-line system, but not both, it said. In the past, institutional investors were able to use both, while retail investors were not allowed to use the online system.
The new rules are also meant to ensure that IPO prices more accurately reflect market demand.
The commission said that it might reduce the proportion of shares held for lock-up periods to help reduce speculation and previous huge overhangs of untraded shares.
In the past, investors used to worry that, once released from lock-ups, such huge pools of untraded shares might glut the market, pushing prices lower.
Regulators suspended approvals of new IPOs in September, after seeing share prices stagnate at well below half the Shanghai Composite’s peak of 6,124.04 in October 2007.
But share prices have climbed 53 per cent this year, reinforcing confidence in the market’s resilience.
And companies need to be able to issue shares to raise capital.
Some 32 companies are in line to launch IPOs in the Shanghai market, the official Xinhua News Agency reported.
First in line may be China State Construction Engineering Corp, which is expected to issue 12 billion shares. Its IPO prospectus, issued about a year ago, said that it intended to raise about 40 billion yuan.
The state-owned company has built many showcase projects, including Beijing’s National Aquatics Centre, otherwise known as the ‘Water Cube’, China Central Television’s futuristic new headquarters and the 1,614 foot tall Shanghai World Financial Centre, mainland China’s highest skyscraper\. \-- AP
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China to allow resumption of IPOs, sets new rules
12 June 2009
(SHANGHAI) China’s securities regulator is allowing initial public offerings (IPOs) to resume after a nine- month hiatus after setting new rules that are expected to improve the odds for smaller investors.
Shares rose yesterday after the China Securities Regulatory Commission (CSRC) issued the new guidelines following several weeks of public consultation.
Chinese investors have usually tended to react negatively to news of new IPOs, expecting them to flood the market with shares that might push prices lower.
But ample funds and optimism over the potential for an economic recovery have helped shore up share prices in recent weeks.
‘It’s just a short-term fluctuation. In my opinion, the plan to resume IPOs will have little impact on the market’s performance,’ said Wei Daoke, an analyst at Shenyin Wanguo Securities in Shanghai.
‘I think liquidity is still adequate for the long-term, and the market trend is upward,’ Mr. Wei added.
The benchmark Shanghai Composite Index edged lower yesterday, slipping 0.3 per cent to 2,807.02 points. On Wednesday, before the rules were issued, the index closed at a 10-month high.
The new IPO regime is meant to ensure better opportunities and protection for retail investors, who often have been virtually shut out of major IPOs by big institutional investors who would win the lion’s share of subscriptions, state media cited commission officials in Beijing as saying.
Big investors will be limited to one stock investment account for buying newly issued shares, rather than the numerous ones they could use to obtain new shares if they had more than five million yuan (S$1 million) in capital, the CSRC said in a notice posted on its website.
All stock investors have to subscribe to new share issues using either an online or off-line system, but not both, it said. In the past, institutional investors were able to use both, while retail investors were not allowed to use the online system.
The new rules are also meant to ensure that IPO prices more accurately reflect market demand.
The commission said that it might reduce the proportion of shares held for lock-up periods to help reduce speculation and previous huge overhangs of untraded shares.
In the past, investors used to worry that, once released from lock-ups, such huge pools of untraded shares might glut the market, pushing prices lower.
Regulators suspended approvals of new IPOs in September, after seeing share prices stagnate at well below half the Shanghai Composite’s peak of 6,124.04 in October 2007.
But share prices have climbed 53 per cent this year, reinforcing confidence in the market’s resilience.
And companies need to be able to issue shares to raise capital.
Some 32 companies are in line to launch IPOs in the Shanghai market, the official Xinhua News Agency reported.
First in line may be China State Construction Engineering Corp, which is expected to issue 12 billion shares. Its IPO prospectus, issued about a year ago, said that it intended to raise about 40 billion yuan.
The state-owned company has built many showcase projects, including Beijing’s National Aquatics Centre, otherwise known as the ‘Water Cube’, China Central Television’s futuristic new headquarters and the 1,614 foot tall Shanghai World Financial Centre, mainland China’s highest skyscraper\. \-- AP
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