Chinese regulator sets IPO quota to soothe investors' fears

PUBLISHED : Wednesday, 21 May, 2014, 1:11am
UPDATED : Wednesday, 21 May, 2014, 1:11am

The mainland's securities regulator, eager to soothe investors' concerns about a fresh equity influx, said yesterday it planned to approve about 100 initial public offerings from next month to the end of the year.

The announcement, following the State Council's publication of guidelines earlier this month, added to evidence that Beijing is striving to underpin the beleaguered stock market.

China Securities Regulatory Commission (CSRC) chairman Xiao Gang said in a statement posted on the regulator's website that it would arrange new listings at an orderly pace to steady investors' nerves.

"New share offerings must be properly arranged," Xiao said. "It should be regarded as a task of stabilising the market to meet investors' expectations."

It was the first time the CSRC had unveiled a quota for listings in a specific period of time.

The CSRC has the power to control new share sales and would normally fast-track offering approvals during a bull run and slow down or suspend share offerings at times when market sentiment is weak.

It temporarily halted listings in October 2012 to bolster investor confidence. However, since the beginning of this year, it has allowed dozens of firms that passed review procedures before October 2012 to float new shares.

At the end of April, the regulator restarted vetting new applications, triggering a panic among investors who bet on a further slide in A shares because massive fundraising deals would dilute existing holdings.

Nearly 600 firms are lining up to raise funds on the Shanghai and Shenzhen stock exchanges, anticipating that the central government will give them access to an alternative source of financing after making it harder for them to get bank loans.

Early this year, accounting firm PwC predicted 300 offerings would hit the A-share market this year, netting a combined 250 billion yuan (HK$314.16 billion) worth of capital.

The Shanghai Composite Index, one of the world's worst-performing market benchmarks between 2010 and last year, has lost more than 5 per cent this year.

On May 9, the State Council published guidelines on the development of the mainland's capital market, sending a clear message to the market that state leaders would step in to protect investors' interests.

The guidelines did not appear to contain any concrete initiatives, but analysts said they were a clear sign that the top government officials would take drastic actions to buoy the weak market. Millions of retail investors on the mainland are retired workers and the authorities are concerned their losses on equity investments could pose a threat to social stability.

The Shanghai index rose 0.15 per cent to 2,008.12 points yesterday.