Wave of China IPO suspensions in setback for reforms

Mon Jan 13, 2014 12:27am EST
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By Pete Sweeney and Lu Jianxin

SHANGHAI (Reuters) - Five Chinese companies said on Monday they were postponing initial public offerings (IPOs), in a blow to Beijing's reformist drive to give market forces a "decisive" role in the country's stock exchanges.

The China Securities Regulatory Commission (CSRC) announced in late 2013 that it would move to give investors, not state officials, the primary role in deciding who gets to list and at what price.

But concerns about overpricing and insider cashouts appear to have convinced regulators they needed to step in to prevent the process from being corrupted, further damaging already shaky confidence in the country's stock markets.

"When I saw that the pharma deal had been pulled, it was honestly a bit depressing," said a Hong Kong-based investment banker, who declined to give his name because he is involved with underwriting deals in China.

"It just shows that the CSRC still has its hands held tightly on the tiller."

Along with its plans to abandon the current approval-based system for stock listings in favor of the kind of registration-based system employed in mature stock markets, the CRSC had also announced in December that it would allow IPOs to resume in January after being frozen for more than a year.

The decision was accompanied by a series of related reforms to the pricing of IPOs, and the initial wave of filings appeared promising, with the first two firms to start fundraising attracting massive investor interest.

But since Friday six companies have announced they will voluntarily suspend their listing plans. Sources told Reuters that in the case of drug maker Jiangsu Aosaikang, the suspension announced at the end of last week was the result of CSRC pressure. The CSRC has denied this.   Continued...

A bell bearing the logo of the Shenzhen Stock Exchange is seen during a companies listing ceremony in Shenzhen, Guangdong province February 25, 2011. REUTERS/Stringer