China may ease IPO curbs as CSRC head signals policy loosening, Morgan Stanley says
CSRC chairman Wu Qing emphasises role of capital markets in fundraising and how they can be leveraged to boost the economy
The pace of approvals for initial public offerings (IPOs) in China could return to normal after being curtailed for 18 months, following a hint by the head of the securities regulator that an easing of curbs on fundraising could be under way, according to Morgan Stanley.
Wu devoted a significant portion of the article to the role of capital markets in fundraising, while emphasising the significance of improving the policy framework, as well as mergers and acquisitions. The watchdog has given few signs of relenting since it began slowing the pace of new stock offerings in August 2023.
“This could be a signal of potentially normalising IPOs and reviving fundraising in A shares, likely favouring industrial and tech firms first,” Morgan Stanley analysts led by Chiyao Huang said in a report on Tuesday. China’s yuan-denominated onshore stock market, also known as the A-share market, is partially accessible to foreign investors.
A return to normalcy would mean the securities regulator has rolled back some of the extreme steps taken over the past few years to stem a stock market decline triggered by falling economic growth and the departure of foreign investors. Such measures also include a virtual suspension of short selling. Stable sentiment over the past six months, following a stimulus-induced rally, has potentially left the door open for the CSRC to remove the restrictions on the primary market.
China’s CSI 300 Index has rebounded 25 per cent from a September low after the central bank introduced new funding facilities for stock purchases and top officials pledged more supportive fiscal and monetary policies this year.