China markets fall on new share sale guidelines

Chinese investor in despair
Image caption Analysts said investors were worried that a slew of listings may hurt liquidity in the markets

Chinese stock markets fell on Monday after the regulators issued new rules for reforming the country's share sale market over the weekend.

The rules are likely to see listings resume next year, ending a freeze that has lasted more than a year.

Analysts said investors were keen for the rules to be eased, but there were fears a slew of new listings might not leave enough cash in the market.

The Shenzen stock index fell 4% and the Shanghai stock index dropped 1%.

Zhang Yanbing, an analyst with Zheshang Securities said the guidelines had "sparked worries that a flood of IPOs [initial public offerings] could divert funds from the secondary market".

However, he added that the rules "should be positive to the market in the long run".

Speeding up?

The new guidelines were published by the China Securities Regulatory Commission (CSRC) as part of reforming the country's stock market listing system.

Among the key issues addressed by the new rules are limiting the government's influence over the pricing of share offers and boosting transparency.

Shanghai Composite Index

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According to the state-owned Xinhua news agency, the current system of approving a share listing "can take multiple rounds of reviews and several years before investors receive approval from the securities regulator".

Xinhua said that under new rules, the securities regulator "would only be responsible to decide whether companies fulfil the rules".

"The values and risks would be for investors and the market to judge."

Luke Wang, a vice-president at China Galaxy Securities, said under the new guidelines, "the IPO issuance process will speed up massively".

Deng Ge, spokesman for the CSRC, was quoted as saying by Xinhua that about 50 companies would be able to complete their registration process for IPOs by January next next year.

The securities regulator added that it would also conduct strict checks to ensure that information provided by firms looking to list on the stock exchanges was full and accurate before allowing them to conduct a share sale.

"We will expand the scale of information disclosure and make our review standard and process more transparent," said Mr Deng.

"We will open the IPO process to the public, so that they can have a closer supervision to the issuance process."

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