A senior securities regulator yesterday criticised mainland institutional investors for pushing up initial public offering prices, a day after China XD Electric slid below its offer price on its trading debut. Zhu Congjiu, an assistant chairman of the China Securities Regulatory Commission, told a seminar in Shanghai that some institutions inflated prices during offline subscriptions to the detriment of millions of retail investors. 'Our pricing mechanism is not adequate,' Zhu said. 'It is important to ensure the credibility of the institutions participating in price consultations.' Zhu's remarks signalled that the regulator could tighten its grip on initial public offering pricing again. It gave institutions a bigger say in setting flotation prices when the primary market was re-opened in June last year after a nine-month suspension. On Thursday, XD Electric, the country's largest power transmission equipment maker, fell below its offer price on its first trading day. It was the first A-share company to suffer such a decline since August 2004. The disappointing debut fuelled concern that fundraising activities on the stock market would be undermined if investors were reluctant to subscribe to new shares. Before the CSRC resumed new share offerings, flotations on the mainland were normally set at a price-earnings multiple of 20, to aid the firms' fundraising activities because the shares were artificially undervalued. Early this month, Dingli Communications, a start-up firm due to list on the Nasdaq-style ChiNext market on the Shenzhen Stock Exchange, floated 14 million shares at 88 yuan (HK$100) apiece - 124 times its 2008 earnings. The new shares still triggered a buying frenzy among retail investors, who see flotation stocks as safe bets in the mainland market. Institutional and corporate investors are allowed to bid for about 20 per cent of shares in the so-called offline subscription and underwriters set the price range during that process. The remaining 80 per cent of shares are offered to the public in an online subscription. 'Some of the underwriters and institutions seemed irresponsible in the price-setting process,' said Essence Securities analyst Liu Jun. 'Small and unseasoned investors blindly flocked to the expensive stocks because they were convinced a first-day gain was guaranteed.' The CSRC came under fire in November 2007 when PetroChina had a rollercoaster ride after its trading debut on the Shanghai exchange. The stock jumped 163 per cent on its first day, then plunged. Thousands of small investors lost money when it dropped below its offer price. Investors vented their anger at the regulator, saying it failed to protect their interests. The CSRC said it would give retail investors a bigger say in pricing, but it has yet to do so.