The Chinese government is keen on introducing IPO reforms. (Photo : www.scmp.com)
The China Securities Regulatory Commission (CSRC) announced that it will resume companies' initial public offerings (IPOs) in a bid to make and sustain a rebound after the dramatic market slide last summer.
The move comes as the Shanghai Composite Index was able to rebound by around 20 percent from its August data following a collapse that subtracted a huge $5 trillion from its market value.
For analysts, the decision is timely and will help in reviving the financing function of the market. The resumption of the IPOs will subsequently benefit the Chinese economy overall, the experts added.
Hong Hao, chief strategist at Hong Kong-based investment bank BOCOM International Holdings Co., said: "The IPO resumption was a bit surprising, as it took place earlier than the market's expectation. It is a positive step, and we don't think the new share supply will heavily burden the market, since liquidity is very abundant."
The CSRC further detailed that 10 of the 28 firms that were granted with regulatory approval for new share sales are set to launch their respective IPOs after Nov. 20.
In a news conference, CSRC spokesman Deng Ge remarked: "The market has been gradually stabilized, and the IPO resumption will offer a reasonable supply that will help improve market vitality and benefit its long-term development."
The regulator also recently announced that there will be a new set of measures in order to reconstruct the current IPO mechanism. These include the scrapping of the requirement for advanced full payment shares when an investor wants to subscribe new shares.
The reform in IPO comes after China's top legislative body has undertaken a review of the Securities Law amendment. This decision is expected to establish the much-awaited registration-based IPO scheme.
