China will from Friday drop its requirement for
initial public offering (IPO) subscriptions to be paid in advance,
regulators said Thursday, in a move to curb stock market volatility.
Under the current IPO regime, the China Securities
Regulatory Commission (CSRC) decides which companies offer stocks and
when, as well as setting guidelines for the number of shares and their
price -- all of which are determined by the market in other countries.
The rules systematically undervalue companies coming
to the market, offering near-guaranteed profits to those lucky enough
to secure new shares.
As a result, the advance payment requirement
heightens stock market volatility as investors sell existing holdings to
raise funds for applications, drying up liquidity.
IPOs were suspended in July as part of moves to end a
rout that wiped trillions from Chinese market capitalisations, but
resumed last month.
The change "manifests a market-oriented reform
direction", the CSRC said in a statement. "It is a major step towards
... the registration system."
Authorities have pledged to reform the IPO rules to a
more market-oriented "registration" scheme, with companies allowed to
decide the details of the new share offers themselves instead of the
regulator.
China's lawmakers last week authorised the central government to make changes to the system.
By: Agence France-Presse.
For The #FacebookTeam