In the second week of May, 13 companies joined the queue of more than 700 applicants waiting for the regulator's review of their initial public offering applications.

Analysts expected a delay in approvals from the China Securities Regulatory Commission because of the murky economic outlook, but the enthusiasm of companies seeking a listing did not seem to be dampened.

The number of companies that submitted applications in the single week of May 6 to 12 was not only a record, but also more than the total number of companies that had applied in the five weeks between April 1 and May 5, which was just 12.

"The surging number of new IPO applicants reflects the recovering passion of companies and their sponsors to be listed on the A-share market, as they anticipate that new IPOs will shortly be approved," said Li Xiang, analyst with Huaan Securities.

The CSRC last approved an IPO in October 2012, but analysts said the regulator might take longer to review the applications amid stricter-than-ever scrutiny of applicants.

China's stock market insiders have speculated that IPOs for the A-share market might resume by the end of the first quarter, based on macro-economic recovery and the steadily increasing number of applicants.

Yang Guang, a Shanghai-based stock market analyst, said the reasons for postponing the reopening of IPO pipeline are multifaceted, and a key point is that regulators need more time to review applicants.

By May 13, there were 745 companies in the queue, down from more than 800 in late 2012.

Since Jan 1 2013, 171 company applications were denied. Of these companies, 106 had sought listings on the growth enterprises market board, according to the CSRC.

"Some of the applicants withdrew because they might not be able to pass strict financial and record checks," said a source with a Beijing-based IPO sponsor.

The CSRC recently fined Ping An Securities Co 76.65 million yuan ($12.46 million for sponsoring the IPO of a Wanfu Biotechnology (Hunan) Agricultural Development Ltd, a company which hugely exaggerated its pre-IPO financial figures, and two of Ping An's representatives were barred from working in financial services for the rest of their lives.

Wanfu was fined 300,000 yuan for falsifying some 110 million yuan of net profit in its financial reports for the three years before its IPO.

Zhang Qi, an analyst with Haitong Securities in Shanghai, said China's stock market needs fundamental reform including a mechanism to encourage listed companies to provide yields for shareholders and strengthen their disclosures.

The A-share market, he said, also needs an improved delisting system to eliminate unqualified companies.

"It is the quality, not the quantity, of newly-listed companies that matters," Zhang said.

wuyiyao@chinadaily.com.cn

(China Daily 05/14/2013 page17)