Strict checks fail to deter IPOs

An attempt by the mainland's securities regulator to slow the so-called quake lake of listing applications on the mainland may turn out to have been a botched strategy, with fewer than expected companies voluntarily withdrawing their listing plans during the enforced re-examination campaign.

According to the China Securities Regulatory Commission (CSRC), 124 IPO applicants had terminated their share-sale plans as of Friday, while 765 firms continued to await a nod from the regulator for their listing plans.

The number of withdrawals fell well short of expectations that about 200 applicants with lacklustre earnings for 2012 would abandon their listing plans in light of a stringent re-examination requirement by the CSRC. All applications for initial public offerings were temporarily frozen in October to shore up investor confidence while preventing new shares from draining liquidity from existing holdings.

In January, the CSRC ordered all auditors and underwriters to conduct an in-depth check on prospective listing candidates' 2012 earnings. Though the regulator wouldn't announce the purpose of the re-examination, investment bankers said it was intended as a clear message that companies whose profits declined last year wouldn't be eligible for IPOs and should withdraw their listing plans.

Sources close to the CSRC said it expected to reduce the number of applicants by at least 200 during the campaign. All re-examination reports were required to be filed before March 31.

A top reshuffle earlier this month saw Bank of China boss Xiao Gang replace Guo Shuqing as chairman of the CSRC, with Guo becoming acting governor of Shandong province. The move heightened speculation among the IPO applicants that the new chief regulator would ease the pressure on listing candidates.