China to resume IPOs after year-long hiatus

SHANGHAI - New share offerings will resume in China as early as next month, the country's stock regulator said, ending a ban in place for more than a year, after leaders vowed to give private firms a bigger role in the economy.

There are 760 firms lined up for initial public offerings (IPO) in the world's second-largest economy, and about 50 are expected to go to market by the end of January, the China Securities Regulatory Commission (CSRC) said.

Despite a decades-long boom that was triggered by the loosening of state restrictions, China's Communist authorities retain strong controls over much of the economy, including the power to decide which firms can launch IPOs and when.

However, the CSRC issued new guidelines at the weekend to give the market a bigger role in the listing mechanism.

The move was in line with a document issued two weeks ago after a key Communist Party meeting at which Beijing vowed to let market forces play a more "decisive role" in its economic reforms.

China suspended approvals for new IPOs in November last year, just before the country's once-in-a-decade leadership transition, in an effort to stabilise the ailing stock market.

On Monday stocks tumbled as much as 2.16 per cent on worries about the imminent relaunch, but the Shanghai Composite Index recovered to close down 0.59 per cent at 2,207.37.

The guidelines "sparked worries that a flood of IPOs could divert funds from the secondary market", Zheshang Securities analyst Zhang Yanbing told AFP, but added that they "should be positive to the market in the long run".

"The reform of the listing mechanism will help restore the fundraising function, which is the fundamental function of the stock market, and it's beneficial to the long-term healthy development of the market," Zhang said.

Instead of focusing on firms' profitability, the CSRC said it will focus on whether they can meet requirements for information disclosure and let investors and the market assess the value and risks of the IPOs.

But it stressed that government regulation would continue, saying the changes "cannot be understood as the regulator will have no oversight".

"It doesn't mean stock offerings will not be audited or that junk stocks can be easily issued, but rather the auditing system will be reformed," the statement issued on Saturday said.

The CSRC also said it would start a long-awaited trial for companies to issue preferred shares, offering firms a fresh funding channel.