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December 19, 2009

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Regulator in share prices plea

CHINA'S securities watchdog has called for improvements in pricing mechanisms to control the high valuation of new shares.

"After the regulator stopped giving instruction in setting initial public offerings prices, the prices went higher than before, which indicated that the pricing mechanism is still imperfect," Shang Fulin, chairman of the China Securities Regulatory Commission, said at a financial conference in Beijing yesterday.

The commission issued a new rule ahead of the resumption of IPOs in June, saying that the government wouldn't intervene in IPO prices, which would be decided only by the issuer and the underwriters upon negotiation.

The average price-earning ratio of 17 companies that launched IPOs this month reached a record high of 65.58, double June's figure.

The opening of ChiNext - China's Nasdaq-style board to finance innovative startup firms - contributed a lot to the higher valuation. The average ratio of eight ChiNext firms that began subscriptions this week reached 83.59.

Shang said the new board was riskier than the main boards, so the regulator would tighten supervision over it. "China will enhance supervision over the growth-enterprise market and handle the relationship between regulation and development properly to make sure that the board can truly help innovative firms," he said.

He noted that ChiNext was a good opening for the government to set up a multi-level capital market and more new financial products would be added to the market. The regulator will launch index futures and margin trading at an "appropriate time," and allow more bonds to be traded on the stock exchanges, he said.

It will also encourage listed companies to carry out mergers and acquisitions to inject more premier assets into the market, he said.

Li Rongrong, director of State-owned Assets Supervision and Administration Commission, said: "We will continue to support SOEs to list their main business or conduct a group listing in the capital market."


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