Chinese securities regulator approves five new listings, ending year-long hiatus

Regulator's approval for listings is seen as sign of Beijing's resolve to reform the market

PUBLISHED : Tuesday, 31 December, 2013, 9:02am
UPDATED : Wednesday, 01 January, 2014, 6:24pm

China’s national securities regulator has approved the public listing of five small- and mid-sized companies in Shanghai and Shenzhen exchanges, ending a year-long freeze on new IPOs.

The China Securities Regulatory Commission (CSRC) approved the initial sale of shares by Neway Valve, Guangdong Xinbao Electrical Appliances Holdings, Truking Technology, Guangdong QTone Education and Zhejiang Wolwo Bio-Pharmaceutical, according to company statements made on Monday.

China Business News on Monday evening reported surprise among some of the companies’ staff that the approval for their applications had been granted, as requests had piled up with regulators since the beginning of the hiatus in October 2012.

Only one of the companies will list in Shanghai, China's largest stock exchange. The other four companies received approval to list in Shenzhen, four of them on ChiNext, China's version of the Nasdaq Stock Market.

About 50 firms will be able to list by the end of January, the CSRC pledged in November. Some 760 companies have filed applications to list, the regulator said, adding that it would take about a year to process these applications.

The resumption of IPO approval follows a pledge made at the Communist Party’s Central Committee’s third plenum last month that the market forces would be given a "decisive role" in allocating resources.

If [the new IPOs] perform well, investors may get more confidence

In late November, the mainland's securities watchdog decided to end a year-long drought in domestic initial public offerings (IPOs) by announcing long-awaited reforms to cut red tape and speed up the application process.

The CSRC also said the reforms would give the market a greater role in determining the timing and number of IPOs. Such a long-awaited policy move was designed to revive a languishing market that just three years ago was worth US$71 billion.

Analysts say the move shows Beijing is determined to reform its stock market by approving more quality firms going public to raise capital, but doesn't necessarily mean good news for stock investors in the short term. 

"We don't know yet how these new IPOs can perform. If they perform well, investors may get more confidence. Otherwise, it could be more pressure on upcoming IPOs and the market overall," said an analyst with Haitong Securities who declined to be named as he was not authorised to speak to the media.

"But new IPOs do mean good news to brokerage stocks as we will get more business to do," he said, referring to already listed major mainland securities firms such as Haitong and Citic, which have been awaiting the CSRC's approval to resume IPO business for a year or more. 

The Shanghai Composite Index recovered some of its earlier losses on Tuesday, closing at 2,115.98 yuan with a rise of 0.9 per cent. Shenzhen's component index was Asia's best performing index on Tuesday, rising 1.5 per cent. 

Stocks of the eight largest brokerages listed on the Shanghai Stock Exchange reacted positively on Tuesday. Haitong Securities, the largest brokerage listed on the exchange, climbed 1.6 per cent to 11.32 yuan. Citic rose 3.3 per cent to 12.75 yuan. 

The companies that received approval on Monday are from Guangdong, Zhejiang, Hunan and Jiangsu provinces. They applied for listing between May and July.

China Securities Journal said more listing approvals are expected to follow on Tuesday.