Second board, IPOs not expected until market starts to stabilise
Daniel Ren in Shanghai
Beijing will not launch a long-expected growth enterprise market or resume initial public share offerings unless officials are convinced this year's stock gains are sustainable, sources close to regulators said.
The China Securities Regulatory Commission has shifted its focus from preparations for a Nasdaq-style second board after it failed to receive State Council approval before the annual session of the National People's Congress.
The sources said the central leadership was still concerned about a potential liquidity drain that might keep a lid on the rally of about 20 per cent this year.
The securities regulator was adamant in pushing ahead with the technology-stock-heavy growth market in Shenzhen earlier this year, believing that there was little room for bourses to dip further following a record 65.4 per cent decline in the Shanghai Composite Index last year.
A strong gain so far this year also raised hopes among investment bankers and fund managers that new share sales would resume soon. The CSRC has not approved a single flotation since September last year.
Fan Funchun, a CSRC vice-chairman, told Beijing-based reporters yesterday that no new share sale would hit the market until after reforms of the public offering process were completed.
But analysts said top officials were hesitant about increasing the supply of new shares because the buoyant market was being driven up by speculative capital.
On Thursday, CSRC chairman Shang Fulin said on the sidelines of the NPC meeting that his agency was fine-tuning the listing mechanism.
'A consensus prediction is that new share offerings will be allowed when the Shanghai index reaches the 2,400-point level and stabilises,' said China Jianyin Investment Securities analyst Yang Zongyao. 'Based on the current sentiment, it is possible that the indicator will hit that level.'
The index closed at 2,193.007 points yesterday.
The CSRC started work on a new share sale system this year under which retail investors will be given a bigger say in the pricing of the new shares and underwriters will be required to lower prices to attract more subscribers.
'It will be up to one or two top bosses' decisions to restart the IPOs and launch the second board,' said the investment banking chief of a Shenzhen-based securities company.