Beijing: China will allow more companies to list on its stock market to boost support for its economy, the nation’s top securities regulator said, dismissing concerns that more supplies of shares can depress the market.
The capital market’s recovery from a 2015 rout has been stronger than expected and is now ready for “appropriately” larger supplies of initial public offerings, China Securities Regulatory Commission Chairman (CSRC) Liu Shiyu said Sunday in Beijing, citing a “mainstream” view. The regulator’s faster approval of IPOs last year had been “welcomed” by the market, he said, adding that the effects from previous practices of slowing or suspending share sales amid market downturns have proven “not good.”
“The entry of new companies can increase market liquidity and can attract additional capital,” Liu told reporters. “As investment value increases, confidence of the entire society strengthens.”
While quickening IPOs as the market recovers from its $5 trillion rout in the summer of 2015, the regulator this month also announced new curbs on additional fund-raising by listed companies. Stability, which was the highest expectation among market participants last year, remains a key objective this year although the CSRC would also aim to make new progress and “new breakthroughs” in reforms, Liu said, without elaborating.
Chinese regulators, who clamped down on markets during the stock rout, are slowly warming to reforms as volatility subsides. Over the past three months, authorities opened the Shenzhen-Hong Kong exchange link and said they’ll push ahead with a trial for more exchange-traded fund options and pledged to increase the pace of initial public offerings.
More than 600 companies are seeking approval for first-time share sales, Fang Xinghai, vice chairman of the CSRC, said during a panel discussion last month at the World Economic Forum in Davos, Switzerland. The CSRC approved 280 IPO applications last year, when 248 companies completed such sales, Liu said on Sunday without providing year-earlier comparisons.
The number of shares issued in private placements can’t be more than 20 per cent of a company’s total shares, the CSRC told reporters on February 17. Non-financial companies seeking a share sale shouldn’t have a large balance of longer-term financial investments such as assets for trading or funds lent to others, the CSRC said, though it didn’t provide more details.