Work on IPO reform 'going smoothly'

Updated: 2013-04-13 14:14

By Chen Jia in Beijing and Wu Yiyao in Shanghai (China Daily)

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Work on reforming China's initial public offering system is progressing smoothly, according to officials at the China Securities Regulatory Commission.

A spokesman for the securities regulator said new policies "to deepen IPO reform will be released officially at the right time," without elaborating.

The reforms are expected to focus on requiring public enterprises to release accurate and transparent information, and reducing administrative intervention in the IPO market.

China's IPO market has been frozen since October, with more than 600 applications on the waiting list.

The CSRC has organized 15 special teams to check the financial reports of 30 companies, which were randomly selected on April 3 from among IPO applicants.

"Most of those team members are certified accountants," the CSRC official said.

During the on-site inspections, sponsor institutions are being required to provide all original financial or relevant certificates, even flight tickets, to prove they have carried out the proper level of due diligence, to ensure the accuracy of financial details.

One investment bank employee, with the online nickname "YuuSiii", posted a picture on Sino Weibo, showing 27 large boxes of profiles and materials being used on one inspection, which he described as the "strictest ever".

"Dozens of sleepless nights are coming," he added on his post.

The CSRC spokesman said: "All of the pre-listed companies and their intermediaries have the responsibility to provide complete and true information."

Sponsors are required for new share offerings to ensure that financial data put forward by a company raising funds is truthful, and typically sponsors are individual members of the underwriters of the offering.

The ongoing special scrutiny is believed to have scared about 160 enterprises into withdrawing their IPO applications this year.

According to venture capital experts, the impact of inactive overseas capital markets, frozen IPO channels for existing portfolios, and increasing pre-IPO costs, may linger for a while in China.

But with the recovering macro economic situation, the reopening of the local IPO market may help with a rebound in domestic markets.

Experts at the ChinaVenture Investment Conference in Shanghai on Friday said focused investment strategies were the major solutions for private equity investors during any tough time for the PE sector.

Chen Hao, managing director & investment director at Legend Capital, said faced with mounting difficulties in raising capital, investors need to focus on value exploration and value creation.

"Investors need to return to value and make efforts to add value to the enterprises in which they have invested, to accumulate resources. They also have to be focused on building up core competence," said Chen.

According to data from ChinaVenture, in the first quarter of 2013, the Chinese PE market saw a combined investment of $2.98 billion, down 41.7 percent from $5.12 billion in the first quarter of 2012.

There were 39 PE investments, a 20.4 percent quarter-to-quarter decrease, and a 51.9 percent year-on-year decrease.

Separately on Friday, the CSRC also announced it plans to start building a pre-warning system to regulate abnormal trading.

The supervision system will be installed in the two bourses in Shanghai and Shenzhen, and be designed to directly transfer suspicious trading information to the CSRC's investigations department.

"This will be helpful to improve the efficiency of discovering and punishing illegal behavior, such as insider trading, which hurts investor interests and disrupts the market," the CSRC official said.

In addition, the CSRC approved the night trading of gold and silver futures on the Shanghai Futures Exchange.

The extended trading period will be from 9 pm to 2:30 am the next day, Monday to Friday.

"Night trading is expected to start before the end of this year," the spokesman said.