Wednesday, May 27, 2009

China stock regulator issues new draft IPO rules

SHANGHAI (AP) 23/05/2009

China's securities regulator has issued new draft regulations on initial public offerings in a step toward a resumption of share listings. The new rules are meant to ensure that share prices more accurately reflect market demand, the China Securities Regulatory Commission said in a statement on its Web site Friday.

China has in effect suspended share offerings to help prevent stock prices from falling lower amid a correction that began in late 2007 after the Shanghai Stock Exchange benchmark, the Composite Index, hit an all-time high of 6,124.04.

The Shanghai Composite Index fell 13.02 points, or 0.5 percent, to 2,597.6 on Friday, ending the week down 1.8 percent. But the benchmark has gained more than 40 percent this year, raising confidence that the market is resilient enough to absorb new share listings.

The share regulator said it is seeking opinions on the draft rules until June 5 and will then revise them.

A number of big state-owned companies, including the Agricultural Bank of China, the country's main rural lender, are awaiting IPOs. Friday's move may clear the way for them to go ahead.

The securities commission did not give details on how it will ensure that pricing of IPOs is more in line with market demand. IPOs generally are viewed as priced strategically low, to ensure a stunning advance when they begin trading.

In one major change, it ends the practice of allowing institutional investors to participate in both the institutional and retail tranches of share offerings. The aim is to allow retail investors a bigger share of IPOs by preventing institutional investors from crowding them out.

The new rules also set a limit on how many shares an investor can seek in any given IPO. IPOs will resume after the rules are finalized, the regulator said. «We will closely monitor market feedback and manage the pace and steadily carry out related work,» the statement said.