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China to Lift Ban on IPOs and Reduce Government Control on Markets

The China Securities Regulatory Commission has signaled that it will scale back its control of the market and lift the unofficial ban on initial public offers implemented after Lehman Brothers collapsed in September 2008. From The Times of India:

China’s securities regulator has indicated it would lift the unofficial ban on initial public offers that came into effect after the collapse of Lehman Brothers last September. It also promised to push through major reforms in the market. It specifically promised to reduce the extent of control it exercises on the market.

The China Securities Regulatory Commission has come out with a consultation paper seeking the views of the industry on a set of measures that include a move to “diminish administrative guidance” in setting IPO prices, it said.

The regulator has been criticized for allowing companies to set share prices at artificially low levels so that they surge up dramatically on the day of listing and bring about an overall feel good atmosphere in the market. This allowed for little role of market forces and the regulator actually played a role in moving prices, the critics say. Retail investors are at a disadvantage while the big players make the most of the existing system, critics say.
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- May 23, 2009 2:23 PM
China Mulls Letting Four Brokers Try Margin Trading

From Bloomberg:

Citic Securities Co. and three other brokerages may be allowed to offer loans for stock purchases as China’s government seeks to bolster the market after the benchmark index slumped 66 percent this year.

Haitong Securities Co., Guotai Junan Securities Co. and Everbright Securities Co. may also start margin trading as early as mid-November under a pilot program by the securities regulator, an official with knowledge of the matter said, declining to be identified because the information isn’t public.

The China Securities Regulatory Commission aims to lure investors and expand the nation’s capital market as slumping stock values erode trading. Brokerages may earn 6.6 billion yuan ($966 million) of interest income from margin trading and short selling next year, the Shanghai Securities Journal reported Oct. 6, citing an estimate from Haitong.
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- October 16, 2008 10:55 PM
China Will Test Short Selling, Margin Lending

From Wall Street Journal:

China’s securities regulator said Sunday it would shortly begin a trial program allowing securities firms to engage in margin lending and short selling, long considered necessary to help the country’s stock market mature beyond its repeated boom-bust cycles.

The China Securities Regulatory Commission said in a statement on its Web site that the program would be started, but it didn’t give a timeline. It said the brokerages allowed to participate in the program would be decided based on their net capital size and risk capabilities, among other criteria. The trial would be expanded at some point, it said.

A broker talks on the phone at a brokerage firm in Hong Kong.
Margin trading allows investors to borrow money to buy shares. Short selling allows investors to sell borrowed stocks, typically in a bet that prices will fall.
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- October 5, 2008 8:00 PM
China Cracks Down on Market ‘Ratholes’

From the Financial Times:

China’s securities regulator has banned one fund manager from the country’s capital markets for life and another for seven years in a warning to the industry to clean up lax internal controls.

The two managers were banned after buying shares in companies their funds invested in and then selling them for a profit – a practice known as “building a rathole” in Chinese.

Tang Jian, a former manager for China International Fund Management, a joint venture between JPMorgan and Shanghai International Trust Co, was banned for life after storing up Rmb1.53m ($220,000) in his rathole, according to the China Securities Regulatory Commission (CSRC). Wang Limin, formerly a manager at China Southern Fund Management, was banned for seven years after similarly making a profit of Rmb1.5m.
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- April 23, 2008 9:52 AM