CSRC orders underwriters and auditors to review listing applicants

Mainland stocks watchdog orders underwriters and auditors to review applicants seeking to float on the share market to ensure their quality

PUBLISHED : Thursday, 10 January, 2013, 12:00am
UPDATED : Thursday, 10 January, 2013, 4:21am

The mainland securities regulator has ordered underwriters and auditors to conduct in-depth checks on nearly 900 listing applicants, at a time when it has suspended new share sales to bolster investor confidence.

The move reflects Beijing's renewed efforts to ease the fund-raising pressure on an already weak market as it seeks a way to break out of the rut.

According to a document published by the China Securities Regulatory Commission, underwriters and auditors must file a report of the ordered review by March 31.

The CSRC on Tuesday held a meeting with 300 executives from investment banks and accounting firms where they were told to ensure the quality of new stock offerings.

Investment bankers said the regulator was sending a clear message to the underwriters that they should withdraw listing applications if the companies were not up to scratch.

Beijing has stopped approving new listings since October to avert a fresh equity influx soaking up cash, in a bid to boost the sluggish market.

It is believed the suspension will remain until the National People's Congress in March.

All applicants have to submit earnings reports for last year when the CSRC resumes processing listing applications. The regulator would randomly check the reviews of the underwriters and auditors, the document said.

The CSRC has been under heavy pressure to revive the Shanghai market, one of the world's worst performers in the past three years.

About 900 companies are waiting to raise funds on the Shanghai and Shenzhen exchanges. The staggering number has weighed on retail investors, worried that a flood of new shares will drain away cash from the market and drag down existing stocks.

The regulator is trying to divert some of the applicants to Hong Kong and the newly expanded over-the-counter market but analysts said that would not be enough to restore investor confidence.

"The listing outlook remains unclear," said Ding Ke, the chief executive of Huaying Securities. "All companies are taking a wait-and-see approach."

Analysts expect the CSRC to tighten the review procedure when it restarts vetting applications.

The CSRC has long been criticised for allowing sub-par firms to float, with some posting huge profit falls after listing.

The regulator said the review was aimed at weeding out some applicants.

CSRC chairman Guo Shuqing has taken a number of steps to encourage share buying since he took office in late 2011. On Tuesday, the Shanghai exchange issued a new rule requiring all firms failing to set aside at least 30 per cent of their profits as dividends to state the reasons for not doing so in their annual reports.