Dong Shaopeng: IPOs slow down on Chinese stock market to enhance quality of listed companies, protect investors


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Dong Shaopeng: IPOs slow down on Chinese stock market to enhance quality of listed companies, protect investors


Source: GT Published: 2024-02-26

The pace of IPOs in China's stock market has slowed down, with two 'zeros' for the whole trading week from Monday, as regulators have tightened scrutiny of new listings to enhance the quality of listed companies-part of the broad-ranging measures to stabilize the capital market.

Enforcing strict regulations on companies looking to go public is crucial in protecting investors and maintaining the integrity of the market, experts said.

There were no new IPOs available for subscription and no new listings for a whole trading week from Monday to Friday, for the first time since China's securities regulator proposed 'phased tightening of the IPO pace' in August 2023, according to Wind, a financial information database.

As regulations have become tighter, the approval rate and fundraising amount for A-share IPOs dropped this year.

According to data from Wind, as of Sunday, 44 companies had terminated their IPOs this year, compared with 25 at the same time last year. Most companies cited reasons such as reevaluating their capital market strategy and future development plans.

As of Sunday, the approval rate for A-share IPOs this year was 88 percent, lower than the approval rate of 90.58 percent for the whole of 2023.

The amount of funds raised through IPOs this year also declined compared with the same period last year.

As of Sunday, 18 companies had completed IPOs this year, raising a total of 15.7 billion yuan ($2.18 billion). In comparison, 43 companies had gone through the IPO process by the same time last year, raising a total of 39.4 billion yuan.

The recent regulatory moves to ensure the quality of listed companies and increase penalties for illegal activities are necessary measures to guarantee high-quality IPOs, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Monday.

The China Securities Regulatory Commission (CSRC) recently made renewed efforts to thoroughly review companies seeking IPOs and enhance oversight at every stage of the process before and after the listing.

Yan Bojin, head of the CSRC's department of public offering supervision, told a press conference on Friday that the CSRC is continuously strengthening oversight throughout the entire IPO process and cracking down on fraud.

'The CSRC will also significantly increase on-site inspections of companies planning to go public, in order to improve the quality of listed companies and better protect investors,' Yan said.

Tian Xuan, associate dean and chair professor of finance with the PBC School of Finance at Tsinghua University, who attended a CSRC meeting on February 18, suggested strictly controlling the IPO process and attracting truly high-growth, high-tech companies.

Efforts should be made to strengthen the full-process supervision of listed companies, resolutely delist those that should be delisted, and promote market competition and survival of the fittest, Tian told the Global Times on Monday.

In dealing with fraud and other illegal activities, Tian said that it is crucial to increase penalties. For instance, penalties could be determined based on illegal gains obtained by the violators.

At the Friday meeting, Yan dispelled market rumors that the CSRC would retrospectively investigate IPOs over the past decade. But this rumor reflected investors' focus on public companies' quality, he said.

Yan said that whether it is a company seeking a listing or one that is already listed, they are all subject to continuous strict supervision by the CSRC.

On February 18 and 19, the CSRC held symposiums with a wide range of market participants to solicit opinions and suggestions on strengthening capital market supervision, preventing and resolving risks, and promoting the high-quality development of the capital market.

The meetings addressed tightening the IPO approval process and further strengthening supervision and inspection of companies planning to go public, with a strong emphasis on cracking down on financial fraud, the Securities Times reported.