China Issues Rules to Allow Resumption of IPOs

China's securities regulator has issued new rules reforming initial public equity offers, paving the way for an immediate resumption of a backlog of stock IPOs that had been halted since last September.

More than 30 companies, including Everbright Securities, a top-10 brokerage, and China State Construction Engineering, the biggest home builder, have won regulatory approval and have been waiting for up to a year to go public after a slumping stock market in 2008 spurred the regulator to quietly suspend IPOs last autumn.

An IPO resumption could push at least 100 billion yuan ($15 billion) in new shares onto the market this year, according to Reuters calculations based on the waiting list, but China's stock market has generally been rising after the regulator hinted in late May that it would soon resume such offerings.

Now the new rules, which come into effect immediately, would reduce administrative interference in IPO pricing and expand the portion of new share purchases by retail investors, according to the regulations published on the website of the China Securities Regulatory Commission (CSRC), www.csrc.gov.cn, late on Wednesday.

Previously, the CSRC from time to time gave instructions to Chinese companies on how to price their IPOs so as not to cause instability in the stock market. In some cases, it gave detailed requirements, such as pricing IPO shares around 20 times price earnings (PE) ratios, industry officials have said.

The stock watchdog published the new rules on Wednesday after it made a draft public in late May and invited public opinion until June 5, indicating then that it had begun a countdown for a resumption of IPOs.

In contrast to analysts' expectations for a period of consolidation in China's stock market in reaction to the news, the benchmark Shanghai Composite Index has risen 8.4 percent since the draft was published on May 22, buoyed by tentative signs of an improvement in China's economy and a rebound in other global equities.

The Chinese market has jumped 55 percent since the start of this year, also propelled by technical buying after the index plunged 65 percent last year amid the global financial turmoil.

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