China is restricting approvals for initial public share sales to arrest a decline in the world's worst-performing major stock market, industry sources said Friday.
The China Securities Regulatory Commission is delaying the issuance of written approval documents, the final regulatory stage, to companies preparing initial public offerings.
Regulators rejected Great Wall Motor Co's planned share sale last month, and about a third of IPO applications were turned down, compared with 8.3 percent when stocks peaked in October, based on data from the watchdog's Website.
CSRC Chairman Shang Fulin is trying to cushion a market that plunged 52 percent from the record, making the CSI 300 Index the worst performer among the 20 biggest benchmarks this year.
"Controlling share sales is an important tool for CSRC, and it's effective in the short term," said Leo Gao at APS Asset Management Ltd in Shanghai. "More stock sales in a bear market is bad news" for investors.
There were 91 billion yuan (US$13.3 billion) of IPOs in China in the first half, a 26-percent drop from the same period a year earlier, according to data compiled by Bloomberg News. The CSI 300 closed 1.3 percent higher Friday.
Great Wall, China's largest maker of sport utility vehicles, had its application for a secondary sale in Shanghai rejected by regulators on July 14.
"The CSRC is trying to stabilize the market ahead of its hosting of the Olympics this summer for reasons of face," said Leslie Phang, Singapore-based head of investment at the private-client unit of Schroders Plc. "But these measures can only provide a short-term boost and it's fundamentals, such as higher oil prices and production costs, that will affect China's stock market."
Shang vowed on Wednesday, during the regulator's semiannual supervision working meeting, to make the market more stable.
He said in June that he would "rationally balance supply and demand in the capital market and adjust the pace of financing in an orderly way."
(Shanghai Daily August 3, 2008)
