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CSRC on pricing mechanism of IPO stocks

By Li Zhenyu (People's Daily Online)

16:05, June 06, 2012

BEIJING, June 6 (People's Daily Online) -- The China Securities Regulatory Commission (CSRC), China's top securities regulator, recently made the remarks in a statement on the pricing mechanism of IPO stocks.

The CSRC believes the high-priced IPO stocks are dangerous.

"The high price of IPO stocks not only resulted in poor market ecology but also brought the phenomena of wasting resources, poisoning social atmosphere, encouraging fraud and illegal acts," said the CSRC in the statement.

"It distorted the market structure from the most basic level and decided the downward trend of the stocks in the future. Thus, the so-called 'short bull market and long bear market' would become inevitable."

The CSRC further explained that the reasons of rare high-priced issuance of stocks are very complex, including institutional and regulatory problems, social culture, investment habits and market psychology, which must be integrated in a comprehensive way.

In order to improve the pricing mechanism and inhibit the "three highs" in the stock market and hype of IPO stocks, the emphasis will be laid on enhancing pricing constrains of buyers, increasing the pricing responsibility of underwriters, improving stock liquidity and strengthening the supervision of pricing behaviors, the CSRC said.

In the long run, it must continue to strengthen the quality of information disclosure and social supervision, improve the legal environment and introduce institutional investors, the top regulator pointed out.

A key task on the nationwide financial work conference at the beginning of 2012 is to deepen the market reform of issuance system.

In terms of issuance supervision, it must be more focused on information disclosure to improve the quality of financial reporting and inhibit packaging and beautifying achievements, said the CSRC.

On April 28, the CSRC announced the "Guidance on Further Deepening the Reform of IPO System" to further promote the construction of issuance system and strengthen the authenticity, accuracy, adequacy and completeness of information disclosure to enhance the quality of information disclosure.

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