Yao Gang, vice-chairman of the China Securities Regulatory Commission (CSRC), speaking at a conference in Beijing this week, said that mainland stock exchanges would restart IPOs in July.
The Chinese IPO market has been in a state of suspended animation since August 2012. Authorities had been hoping for an improvement in the stock indices before admitting the line of 600 companies waiting to list. That improvement never came, and nearly one year on, the Shanghai Composite Index is at almost exactly the same level as it was back then, with virtually no bullish signs on the horizon.
Coming during a week where global markets have been spooked by uncertainty over possible US Federal Reserve plans to taper off its liquidity support, the news about new listings resuming (and soaking up investment in existing blue chips), has been one cause in the biggest weekly fall in the Shanghai stock market for four months. The Shanghai index is down 5% this year.
In the Q2 2013 edition of The Trade Asia, we take a look at the history of the IPO cessation, and the frustrations it has caused. However, since going to print, new information has continued to emerge.
According the Shenzhen Stock Exchange, the CSRC is now soliciting public opinion on promoting IPO reform. As part of this programme, the CSRC is calling for stronger accountability and greater transparency in controlling shareholders and further strengthening supervision and law enforcement.
In 2010 and 2011, there were frequent new IPOs in the Chinese markets, absorbing liquidity and contributing to the Chinese stock markets’ overall poor performance. A number of these IPOs were qualitatively lacking, and with hindsight, perhaps should not even have been candidates. Therefore re-vamped rules are now required as the IPO market re-opens.
Under the CSRC suggestions, issuers would be required to disclose their prospectus at an earlier time than they are currently required to do, and will be allowed to decide on the timing of issuance after obtaining IPO approval.
Secondly, issuers would be allowed to issue corporate debts while their IPO prospectuses are being reviewed. Thirdly, the validity of IPO approval documents would be extended to one year.