China may lift a 12-month ban on new share sales this year following a Chinese Communist Party (CCP) policy summit, according to the nation’s largest brokerage by market value.
Top party officials will meet in Beijing from Saturday to Tuesday to map out a blueprint for reform. Regulators suspended initial public offerings (IPOs) in October last year and pledged not to lift the ban until new rules are introduced to curb misconduct and boost protection for investors. The benchmark Shanghai Composite Index, which plunged to the lowest levels in four years in June, has since rallied 10 percent.
“We still have reasons to believe that the IPOs may resume before the end of this year, as the policy meeting ends Nov. 12,” Boming Cheng (程博明), president of Citic Securities Inc (中信證券), said in New York, where he was attending the Chinese Finance Association’s annual conference.
The China Securities Regulatory Commission (CSRC) is drafting rules to curb misconduct that would establish stiff penalties for investment banks before ending the freeze on IPOs. The CSRC regulations, published in draft form on June 7 on the agency’s Web site, call for penalties against banks for transgressions such as including inaccurate information in a prospectus and poor risk disclosure.
Of the 622 companies that have submitted self-inspection reports, 268 have withdrawn their IPO applications, according to an Oct. 11 statement on the CSRC Web site.
China has not had a new listing since Oct. 11 last year, when Org Packaging Co (奧瑞金包裝) and Haixin Foods Co (海欣食品) started trading in Shenzhen.
The restart of IPOs will be a “big negative” for the market, Zhang Yanbing (張彥斌), analyst at Zheshang Securities Co (浙商證券) in Shanghai said. “It will exacerbate the fear of tight liquidity. Small-cap companies, which are already performing badly because of the high valuations, will be hit because money would be diverted to the new companies.”
The securities watchdog has not said when the new rules will be implemented.
The market freeze has been a blow to investment banks, whose revenue had soared as China became the world’s biggest market for IPOs in 2010.