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China boosts pace of IPOs, adding to supply as prices surge

BEIJING - China’s securities regulator is increasing the pace of initial public offerings, allowing more companies to take advantage of a world-beating rally that has sent the Shanghai Composite Index to a seven-year high.

BEIJING - China’s securities regulator is increasing the pace of initial public offerings, allowing more companies to take advantage of a world-beating rally that has sent the Shanghai Composite Index to a seven-year high.

The China Securities Regulatory Commission (CSRC) will review and approve two batches of IPO applications each month, up from one previously, it said on its official microblog today (April 24). Twenty-five IPOs were approved on Thursday, the CSRC said.

Unlike counterparts in the United States or Europe, China’s securities regulator controls the timing and pricing of debut offerings. The agency is boosting new listings in its 47 trillion yuan (S$10.2 trillion) stock market amid insatiable demand. All except one of the more than 140 offerings over the past year has surged the maximum 44 per cent allowed on their first trading day, according to data compiled by Bloomberg.

“The current market condition is benign for regulators to let more companies issue new shares,” said Mr Jun Zhang, head of China Research at Rosenblatt Securities.

“The fast gains in Chinese equities have attracted a lot of capital and investors are scrambling for IPOs. The supply increase will help meet the demand,” he added.

A seven-person listing review committee examines each IPO application, judging factors such as investment potential and profit sustainability. The CSRC has approved 30 offerings for April, after 26 in March, 18 in February and 21 in January, Bloomberg data show.

Chinese stocks are up 36 per cent this year after gaining 53 per cent last year, more than any other nation.

IPOs have been surging after regulators put pressure on companies to keep offering prices low to protect individual investors. While policy makers have made no official announcements about a valuation ceiling, data compiled by Bloomberg show that virtually no companies in China are going public at prices of more than 23 times their earnings per share. - BLOOMBERG

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