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Daniel Ren

The mainland securities regulator begins vetting a share sale application today following a one-month hiatus, raising investor fears of a torrent of initial public offerings that would further weigh on the sluggish market.
Beijing suspended new share offerings and share placements to stabilise the volatile equity market during the 18th Communist Party national congress that ended last week.
The China Securities Regulatory Commission (CSRC) is expected to review a proposal by Zhuhai Port today to sell more shares.
It is the first hearing of a refinancing proposal on the mainland since October 24.
The regulator has not approved an IPO since October 10.
It remains to be seen when the regulator will reopen the IPO market, but it is under heavy pressure to fast-track approvals because there are 800 companies lining up to raise funds.
"The regulator is facing a dilemma, but all signs are showing the IPO suspension won't last long," said an investment banker who asked not to be identified.
"It wants to create a market-based IPO mechanism but the market downturn is deterring officials from taking action," the banker said.
Earlier this month, Yao Gang, a vice-chairman with the CSRC, said the regulator would lift the suspension soon and continue to vet applications.
He did not say when, though.
The CSRC began releasing the names of IPO applicants at the beginning of the year to ensure transparency in the vetting process.
The number of firms waiting to get to market jumped to 800 recently from the 515 when the applicants list was first released in early February.
To avoid a liquidity drain, the CSRC has traditionally either slowed IPO approvals or temporarily suspended hearings to support a beleaguered market.
Between August 1 and September 24, the regulator did not review a single IPO.
The efforts failed to bear fruit as the benchmark Shanghai composite index lost about 9 per cent this year, following a woeful performance in 2010 and 2011.
If the CSRC were to approve new IPOs in the coming weeks, the market could fall as much as 10 per cent as fresh equity supply will exacerbate the bearish sentiment, analysts said.
When CSRC chairman Guo Shuqing took office late last year, he gave priority to the IPO system amid harsh criticism from investors about a flood of new shares.
Guo required underwriters and companies to reasonably set offer prices as a way to curb the size of the fundraising.
So far, 90 billion yuan has been raised in mainland IPOs this year, a third of the 270 billion yuan for all of last year.
"It's not correct to suspend IPOs, the focus should be on how to fine-tune the system," said Zhang Qi, an analyst with Haitong Securities.
"The CSRC has to be bold enough to deepen the reform."
On the mainland, the regulator has been using the pace of IPO approvals as a tool to intervene in the volatile market.
Fast-tracked IPO approvals are normally aimed at curbing excessive liquidity while a slowing or suspension always results from the regulator's intention to shore up investor confidence amid a bear run.
Guo proposed to introduce an American-style IPO system, or disclosure-based system, under which listing hopefuls are required to provide detailed information about their finances and governance for the market to judge their worth.
Under Guo's plan, the regulator would fully relinquish its authority and role in IPO processes while the two stock exchanges monitor the information releases by the applicants.
The plan however would face objections from the authorities because state leaders are reluctant to see a further slide on the stock market which could trigger social disorder.
Analysts said the regulator would have to maintain its tight grip on the IPO market for a long time before the market-based reform can be introduced.


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The China Securities Regulatory Commission has been using the pace of IPO approvals as a tool to intervene in the volatile market. Photo: Reuters

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Pressure is growing on the authority to approve more equity offerings but there is also the fear that this will weaken the market


China's securities regulator set to open the gate on fundraising

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Pressure is growing on the authority to approve more equity offerings but there is also the fear that this will weaken the market

Pressure is growing on the authority to approve more equity offerings but there is also the fear that this will weaken the market