The mainland's securities regulator has for the first time allowed companies and underwriters to price initial public offering shares on their own, taking a bold step in further reforming the market.
The China Securities Regulatory Commission (CSRC) said in a statement that IPO issuers and their underwriters could now choose to set a price for the new shares themselves, part of its efforts to fine-tune the offering system that has been blamed for the market slide in the past two years.
However, analysts warn the move is a risky one since granting a bigger say in the pricing process to issuers is likely to result in more elevated IPO prices that could hurt small investors.
Presently, issuers and underwriters cannot set IPO prices unless they consult with institutional investors under the 'off-line subscription system'.
The regulator has not phased out the mechanism of pricing shares via consultations, but issuers and underwriters now have the option of setting their own prices.
IPO shares were priced at lofty levels in 2010 and 2011 as institutions participating in the consultations inflated the prices.
In the first step of off-line subscription, participants are invited to submit the prices they would be willing to offer without stating the number of shares they plan to subscribe for.