The year-long ban on initial public offerings in China could be over. After 14 months since the last company went public in the mainland, the China Securities Regulatory Commission said it expects to have IPOs resume next month. The regulator gave new guidelines aimed at reforming the country's IPO system on Saturday, November 30. The regulator pledged that under the new rules, the role of the government will be reduced while market forces would have more influence in the IPO process.
According to a Financial Times report, the suspension of public listings was seen as a strategy for regulators to support the embattled stock markets in the mainland and allow time for reforms to be put in place. For the past three years, China's bourses are among the worst-performing worldwide. However, the move has achieved minimal effect, with the Shanghai Composite increasing just 5% since the freeze was put in place.
A senior executive in a Chinese brokerage firm disclosed to the Financial Times, "This is a signal that the IPO floodgate may be opened soon." To assuage fears that the lifting of the IPO ban would result to the onrush of new listings, the CSRC said that only 50 of the 760 firms who have applied to go public will be prepared by January. The regulator added that it would need a year to complete its review on the other applications.
The report said the reforms in the IPO process has been looked on as one of the test cases for the commitment of China's new leaders to let the market play a role in the economy. The reforms published on Saturday placed limits on how much influence the government has over share pricing and helped bolster transparency. However, the report said that it fell short of the market-determined IPO registration which is practiced in more advanced financial systems.
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