CSRC clampdown sees first IPO pulled

Following reports about the Chinese regulator getting tougher on IPO candidates, the new measures already seem to be having the desired/feared effect. From Finance Asia today (and probably soon to disappear behind the paywall):

Only a day after China’s securities regulator announced it would closely vet the financial statements of listing hopefuls, companies started withdrawing their applications for new share sales.

Guizhou Zunyi Titanium, a titanium sponge producer, announced on Thursday that it would cancel its long-awaited initial public offering and has received confirmation from regulators on the withdrawal. Zunyi was the first company to scrap its IPO plans and more companies are expected to do the same.

Deloitte said earlier this month that about 20% to 25% of current IPO applicants on the mainland may withdraw or re-consider their listings in 2013. If that estimate is correct, up to 220 companies will cancel A-share IPOs this year, lowering the waiting list to 662 firms — still a big number.

Despite the disquiet of the brokers – who of course benefit from higher numbers of IPOs, regardless of the quality of the company – this is probably a good thing. A shortage of listed companies is not the main problem for the A share market.


CSRC tries to clear IPO pipeline

China’s securities regulator has decided to toughen its review of companies aiming to list on the A share market, according to several recent stories including a couple of  reports in Caixin.

All of the 882 companies waiting for China Securities Regulatory Commission (CSRC) approval to go public have been required to submit their financials for 2012 by the end of March. The regulator said it would check the results at randomly chosen firms to prevent fraud.


Winding up the Chinese B share market

It’s rare that anything interesting happens in China’s moribund B share market, but the last couple of weeks have been an exception – even if all the developments point to it no longer existing in the relatively near future.

Owing to China’s capital controls, there are several different types of stock listings used by Chinese companies. To recap quickly:

  • A shares are mainland-incorporated Chinese companies listed on the mainland Shanghai and Shenzhen exchanges and are denominated in renminbi. They can only be bought by mainland Chinese investors and a very limited number of qualified foreign institutional investors.
  • B shares are mainland-incorporated Chinese companies listed in Shanghai and Shenzhen and are denominated in US dollars (in Shanghai) and Hong Kong dollars (in Shenzhen). They can be freely bought both by foreigners and by mainland investors with foreign currency accounts.
  • H shares are mainland-incorporated Chinese companies listed in Hong Kong. They can be freely bought by foreigners.
  • Red chips are companies controlled by the Chinese state, but legally incorporated outside mainland China and listed in Hong Kong. Again, they can be freely bought by foreigners.
  • P chips are companies controlled by private sector Chinese businessmen that are legally incorporated outside mainland China and listed abroad. Usually, P chip is used to mean specifically Hong Kong listed stocks, with S chip being used for private firms listed in Singapore and (less commonly) N share for US-listed Chinese companies and L share for London-listed Chinese companies.