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China pledges to speed up approval of stock listings

Monday, February 27, 2017 - 16:26

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China's top securities regulator has pledged to speed up approvals of initial public offerings (IPOs), as the government seeks to attract capital and boost domestic growth.

[BEIJING] China's top securities regulator has pledged to speed up approvals of initial public offerings (IPOs), as the government seeks to attract capital and boost domestic growth.

Buoyed by the capital market's recovery from a 2015 rout, the China Securities Regulatory Commission (CSRC) on Sunday indicated it would loosen its grip on the nation's stock markets.

The CSRC decides which companies offer shares and when, as well as setting guidelines for the number of shares and their price - all of which are determined by the market in other countries.

Regulators responded to the equities rout in the summer of 2015 by freezing new IPOs in an effort to stabilise stock prices, but CSRC chairman Liu Shiyu vowed to end this practice and introduce "new progress and breakthroughs".

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More than 600 companies seeking to list in the market have struggled with long wait times, followed by seemingly arbitrary approvals.

Mr Liu said faster approvals, particularly for companies in poverty-stricken counties, will attract new capital and boost investor confidence.

"Liu seems to be the first CSRC chief to publicly denounce the practice of shutting down the IPO market whenever there is a crisis," Dong Dengxin, a finance professor at Wuhan University of Science and Technology, told the official Xinhua news agency.

While the regulator signalled a willingness to allow the market to play a larger role in share sales, it has also cracked down on illegal activities by "barbarians".

Mainland Chinese stock exchanges have an unusually high proportion of non-professional investors and have been compared to "casinos", with insider trading and dramatic swings in share prices seemingly unconnected to underlying business prospects.

"There is only a half-step distance between being a financial mogul and a financial crocodile," Mr Liu said.

Li Chao, the CSRC's deputy head, said closer supervision - in the form of compliance risk management and standardised banking businesses - will help prevent a repeat of the stock market turbulence of 2015.

Following a slump that saw the Shanghai stock index tumble nearly 40 per cent in a little more than two months - after peaking in mid-June that year - several investment executives were investigated on suspicion of insider trading.

Last month, former star hedge-fund manager Xu Xiang was jailed for five and a half years.

His was the first insider trading case to be brought to Chinese court and involved more than 40 billion yuan (S$8.19 billion), financial magazine Caixin reported.

The CSRC's planned reforms come as the government tries to staunch a flood of capital heading overseas as investors look for better returns, with interest rates expected to rise, putting pressure on the yuan and threatening the economy.

After Chinese firms went on a multi-billion-dollar foreign acquisition spree last year, the government responded by blasting what it called "irrational" spending and started rolling out new restrictions to curb the outflow of money.

AFP

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