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Business News/ Market / Stock-market-news/  China said to consider suspending IPOs amid plunge in stocks
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China said to consider suspending IPOs amid plunge in stocks

Halting IPOs would head off any diversion of funds into new listings and would come on top of a weekend interest-rate cut

The Shanghai Composite Index dropped 3.3% on Monday, taking declines from its 12 June peak to more than 22%. Photo: BloombergPremium
The Shanghai Composite Index dropped 3.3% on Monday, taking declines from its 12 June peak to more than 22%. Photo: Bloomberg

Beijing: Chinese regulators are considering suspending initial public offerings to stabilize the country’s tumbling stock markets, people familiar with the matter said.

The China Securities Regulatory Commission is meeting on Monday afternoon with major brokerages, said another person, without saying what will be discussed. The people asked not to be identified as the regulator’s deliberations are private. CSRC officials didn’t immediately respond to a faxed request for comment.

Halting IPOs would head off any diversion of funds into new listings and would come on top of a weekend interest-rate cut that was viewed by some analysts as a move to curb Chinese equities’ plunge into a bear market. The Shanghai Composite Index dropped 3.3% on Monday, taking declines from its 12 June peak to more than 22%.

“Suspending IPOs will definitely provide some support to the stock market," said Zhang Yanbing, a Shanghai-based analyst at Zheshang Securities Co. “There have been a lot of IPOs recently including several really big ones, putting pressure on market liquidity."

Subscriptions for 28 upcoming IPOs on the mainland may tie up 4.03 trillion yuan ($649 billion) of liquidity starting early July, according to the median estimate of six analysts surveyed by Bloomberg. The 175 initial share sales in China this year have raised about $22.7 billion, data compiled by Bloomberg show.

Increased protection

China’s securities regulator has suspended IPOs eight times in the history of the yuan-denominated A-share market, five of which were imposed since 2000, according to a Xinhua News Agency report in April 2013.

The last moratorium was imposed in late 2012 and lifted in December 2013 as the regulator revised IPO rules to better protect individual investors from fraud and misconduct among advisers and issuers.

Government action helped the Shanghai gauge surge more than 150% in the 12 months prior to its 12 June peak, as authorities cut trading fees, made it cheaper to open new stock accounts, expanded investment quotas for overseas money managers and eased rules on margin lending. They also lowered interest rates three times before last weekend and reduced lenders’ reserve requirement ratios twice. Bloomberg

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Published: 29 Jun 2015, 03:05 PM IST
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