The decision by Chinas
securities regulator to publish, for the first time, a
full list of Shanghai and Shenzhen initial public offering
applicants has been branded as bad news for
Chinas secondary A-share market by lawyers.
The list, made available on the
China Securities Regulatory Commission (CSRC) website
yesterday, shows that 295 companies have applied to list on the
Shanghai Stock Exchange or Shenzhen's small and medium
enterprise board. An additional 220 firms are looking to float
on Shenzhen's ChiNext board.
FenXun Partners Xusheng
Yang said publication of the list, which will be
updated weekly, had shocked secondary market investors.
Many hadnt realised there were so many potential
issuers waiting in the pipeline, he said.
With over 500 potential
ListCos waiting in line, prices in the secondary market will be
significantly driven down, he said.
But Boss & Youngs partner Hubert Tse believed the
new measures would enable fairer prices for IPOs.
These offerings are priced at such high P/E ratios
there is no room left for investors to profit once shares are
listed or floated on the secondary market, he said.
This sucks so much money out of the market it leaves the
local bourses depressed and lacking in liquidity.
The move was good news for the Chinas capital markets,
he said, as it would make the listing review, pricing and
application process more transparent.
It forms part of the new CSRC chairman Guo Shuqings
drive to build more credible stock market processes in
Yang said market participants lack of understanding
about regulatory procedures for new listings had previously
encouraged a lack of confidence in the CSRC and the IPO process
This should ensure investors become much more
comfortable with the system and the regulator monitoring
it, said Yang. It is huge progress in the right
The decision to advance
publication of pre-disclosure documents from five days to one
month prior to listing was the single most important change, he
Giving the public longer
to properly research potential ListCos is a much more practical
approach, he said. However, he expected investment banks
and potential issuers to be nervous about the potential impact
Under the current system, the
CSRC will post a copy of the draft prospectus on its website
along with a date for when the IPO plan would be reviewed. Once
a company has received regulatory approval, it must launch the
IPO within six months.
Until now, it was unclear when
companies had submitted their applications. It remains unclear
when many of the applicants in yesterdays list will hit
the market. The list has also not stipulated the companies'
Tse said further clarification
was also needed regarding implementation of the new rules, and
to what extent companies in breach of the regulations would be
penalised for non-compliance.