Wave of China IPO suspensions seen as setback in reforms drive

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SummaryThe decision was accompanied by a series of related reforms to the pricing of IPOs

Five Chinese companies said on Monday they were postponing initial public offerings (IPOs), in a blow to Beijing’s reformist drive to give market forces a “decisive” role in the country’s stock exchanges.

The China Securities Regulatory Commission announced in late 2013 that it would move to give investors, not state officials, the primary role in deciding who gets to list and at what price.

But concerns about overpricing and insider cashouts appear to have convinced regulators they needed to step in to prevent the process from being corrupted, further damaging already shaky confidence in the country’s stock markets.

“When I saw that the pharma deal had been pulled, it was honestly a bit depressing,” said a Hong Kong-based investment banker on condition of anonymity. “It just shows that the CSRC still has its hands held tightly on the tiller.”

Along with its plans to abandon the current approval-based system for stock listings in favour of the kind of registration-based system employed in mature stock markets, the CRSC had also announced in December that it would allow IPOs to resume in January after being frozen for more than a year.

The decision was accompanied by a series of related reforms to the pricing of IPOs, and the initial wave of filings appeared promising, with the first two firms to start fundraising attracting massive investor interest.

Sources said in the case of drug maker Jiangsu Aosaikang, the suspension announced at the end of last week was the result of CSRC pressure. The CSRC has denied this.

The latest postponements followed a weekend announcement by the regulator that it would further tighten supervision.

The five companies that postponed their IPOs on Monday are NetPosa Technologies, Hebei Huijin Electromechanical, Nsfocus Information Technology, Beijing Forever Technology and Ciming Health Checkup Management Group.

Li Ka-shing cuts HK utility IPO by a third

Li Ka-shing’s Power Assets Holdings downsized a Hong Kong IPO of its electricity business by nearly one-third to $3.6 billion, a sign that valuations for upcoming deals in the city will need to remain conservative to lure investors. Power Assets will spin off the utility business into HK Electric Investments, offering 4.43 billion units in an indicative range of HK$5.45-HK$6.30 each. That would put the IPO at up to $3.6 billion from an expected $5.7 billion.

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