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Slowdown seen in IPO approval rate

By Wang Xinyuan (Global Times)

09:00, August 13, 2012

China's capital market regulator had disclosed no pre-IPO information for 27 consecutive days as of Sunday, and its review board had approved no new IPOs for 12 consecutive days, reinforcing market speculation that the regulator is deliberately slowing down new listings in order to revive the sagging market.

China Securities Regulatory Commission (CSRC)'s last review and approval meeting for IPOs was held on July 31, and information about applicant companies has not been disclosed since July 17, according to the CSRC's official website.

The CSRC had been disclosing applicant companies' prospectuses almost every week since the end of October 2011 when Guo Shuqing, former chairman of China Construction Bank, took over as chairman of the CSRC and pushed forward a series of reforms of the capital market.

The CSRC was not immediately available for comment Sunday.

Even though the CSRC said on July 13 that it would not interfere with the market by slowing down IPO approvals, many have speculated that the recent inactivity indicates the regulator's intention to stabilize the market.

China's A-share market had been falling steadily since early May until edging up slightly at the beginning of August. The benchmark Shanghai Composite Index fell to 2103.63 points on July 31, a three and a half-years low.

Many retail investors believe that an oversupply of new stocks in a faltering market is to blame for the poor performance. Nearly 10,000 retail investors initiated an online petition on July 17, asking the regulator to stop approving so many IPOs.

But a suspension of IPO is inconsistent with the market-driven reform that the regulator has been striving for, Li Yongsen, a finance professor with Renmin University of China, told the Global Times Sunday.

Unlike in other more mature stock exchanges, companies need to queue up for the regulator's review and approval procedures in order to get listed on China's A-share market.

Due to the relatively slow procedure, "few companies would postpone or quit their IPOs, even amid a sluggish market, as they want to get as much financing as they can," Xu Guangfu, a strategy analyst with Xiang Cai Securities, told the Global Times.

China's A-share market has long been policy-oriented, meaning that investors often count on the regulator to come up with measures to boost the market whenever it slows down, Xu said.

The CSRC has suspended new listings in the past, including just after a sudden plunge in the market following the global financial crisis in April 2008; it did not resume approving IPOs until June 2010.

"But whether the slowdown in IPO approval is a measure to stabilize the market and how positively it will affect the market is yet to be seen," said Li of Renmin University of China.

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