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Analysts say investor worries will not be eased by a drop in share offerings, which have drained funds from the market. Photo: Reuters

Tighter regulatory checks spur Chinese firms to call off IPOs

CSRC says 40 companies withdrew applications after move to ensure quality of new listings

About 100 companies have either withdrawn or suspended their applications to list on the mainland share market amid worries the regulator would tighten checks on their documents.

However, the stepped-up effort to ensure the quality of new listings would not be enough to calm investor concerns about an equity influx that would largely dilute existing holdings.

According to the China Securities Regulatory Commission, 40 companies halted their applications for initial public offerings since the start of the year when it decided to reopen the market following a 15-month hiatus, while a further 37 firms suspended theirs.

"The regulator hasn't found a miracle cure for the ailing IPO issue," said Haitong Securities analyst Zhang Qi. "The reduction in the number of listing prospects would not help ease investor worries."

The CSRC was expected to tighten oversight on earnings and related documents of listing applicants to bolster investor confidence.

The CSRC closed the door on new share offerings in October 2012 to support the weak market. Dozens of companies that were previously approved launched their offerings this year.

The regulator resumed vetting listing applications at the end of last month and pledged to keep unqualified companies out of the market.

All applicants are required to fully publish their earnings and operating details before the CSRC's review. Most of the companies that withdrew or suspended their listing plans were due to fears their earnings and operations would not convince the CSRC review committee, investment bankers said.

At the end of last week, 598 companies had applied to list on the Shanghai and Shenzhen exchanges. Accounting firm PwC said 300 firms would be allowed to raise about 250 billion yuan (HK$311 billion) on the market this year.

Mainland investors have blamed new initial share sales for the bearish mood as more than one trillion yuan was drained from the market by the newcomers between 2010 and 2012.

The resumption of new offerings forced millions of investors to exit the market due to fears of a further downturn.

This article appeared in the South China Morning Post print edition as: Tighter regulatory checks spur firms to call off IPOs
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