Monday, August 13, 2012

Shutting down China's IPO machine and other government actions to stem declines

With China's equity markets stuck at multi-year lows, the Securities Regulatory Commission (CSRC) put a freeze on new IPOs. Given limited appetite for China's stocks, the goal is to tighten the supply and avoid siphoning available liquidity with new IPOs.
Shanghai Stock Exchange Composite Index is a capitalization-weighted index
People's Daily: - China's capital market regulator had disclosed no pre-IPO information for 27 consecutive days as of Sunday, and its review board had approved no new IPOs for 12 consecutive days, reinforcing market speculation that the regulator is deliberately slowing down new listings in order to revive the sagging market.

China Securities Regulatory Commission (CSRC)'s last review and approval meeting for IPOs was held on July 31, and information about applicant companies has not been disclosed since July 17, according to the CSRC's official website.

The fear is that weak stock market will dampen consumer confidence and spending. CSRC has already taken or is preparing a number of other actions to prop up the market. These include:

1. actively pointing out how attractive the valuations are;

2. reducing transaction fees on shares;

3. opening up shares to more non-Chinese buyers;

4. bringing some yuan offshore trades "home";

5. working on speeding up the de-listing process of companies with collapsed share prices;

6. working on getting more of China's institutional investors into equities. Currently about 10% of pension assets in equities in China vs. 40% in the US.

Short of buying shares directly, China's government is pushing hard to generate a rally. So far these efforts have not been very successful, as perceptions of China's weakening economy and eroding confidence in the stock market are going to be difficult to shake.
Related Posts Plugin for WordPress, Blogger...
Bookmark this post:
Share on StockTwits