China’s move to new IPO regulations will boost banks and attract firms to bourse
CHINA’s landmark decision this month to implement a US-style registration system for stock listings will boost revenues at local banks and brokers and lure more companies to the stock market, analysts said.
Under official proposals unveiled by the State Council on December 9, issuers and underwriters will have leeway to choose the pricing and timing of initial public offerings (IPOs), decisions now made by the regulator.
Investors will also no longer be required to set money aside in an escrow account ahead of listings.
The new system, to be approved by the National People’s Congress later this month, will take up to two years to be implemented, a timeframe that analysts said was longer than initially expected but that would ensure a smooth transition.
“It’s going to make the whole IPO process a lot smoother because you don’t have to wait for the approval,” said Paul Lau, partner and head of the capital markets advisory group at KPMG China.
“It’ll be more focused on financial disclosure and compliance with listing requirements and let the market decide when the IPO should happen,” he said.
Nearly 690 companies have filed to go public in China and were waiting for approval for IPOs, the latest regulatory filings showed, more than the sum of all new listings in China between 2011 and last year.
The move will unblock such backlogs, boosting annualised profits at Chinese securities firm by 5.3-billion yuan ($820.4m), according to estimates from broker GF Securities.
Analysts at Daiwa Capital Markets and Bocom International said domestic players such as GF Securities and Huatai Securities would be likely winners from the easier IPO regulations because of their focus on medium- and small-sized issuers.
Large brokers such as Haitong Securities would also benefit due to their sizeable investment banking businesses and balance sheets.
Hong Kong will indirectly gain as Chinese companies are expected to continue to do secondary listings on its stock exchange to access international capital, analysts said.