Chinese securities regulator slows IPO approvals to bolster market confidence

The China Securities Regulatory Commission (CSRC) is slowing down its approvals of initial public offerings in an effort to check a decline in mainland Chinese equities.

The regulator gave the go ahead to only four companies in the latest round of approvals compared with seven a week earlier. This is the second straight week the CSRC has cut the number of new offerings, coinciding with a decline that dragged down the Shanghai Composite Index by 6 per cent from this year’s high on April 11.

“The slowdown trend has basically been confirmed and it will have a positive impact on the market,” said Wei Wei, a trader at Huaxi Securities. “It shows the regulator is taking a very serious attitude towards the recent market performance. You can say it’s only symbolic, but what matters is that the regulator is delivering confidence to investors.”

The latest slowdown in IPO sales adds to recent regulatory measures aimed at boosting the market. Less than two weeks ago, the CSRC unveiled rules broadening sell-off restrictions to all pre-IPO investors and tightening stock sales carried out by major shareholders through block trades.

China’s stock regulator often slows down or even suspends new stock offerings amid declines in the secondary market, believing that the reduced supply of stocks will boost share prices. The CSRC has frozen new IPO share issues a total of nine times in its history, with the latest one being in 2015 when a stock rout erased US$5 trillion in market value.