New rules to raise pricing of IPOs
By Winny Wang |
October 14, 2010, Thursday
|
Print Edition
Print Edition
CHINA'S securities regulator will implement new rules from next month to further improve the pricing mechanism of initial public offerings.
Under the new rules that will take effect on November 1, more institutional investors will be allowed to participate in the book-building process to work out a price range of new stocks, according to the China Securities Regulatory Commission.
At present, prices of IPO shares are worked out based on demand for them and market sentiment. A price range is worked out in consultation with six types of institutional investors - fund managers, domestic brokerages, qualified foreign investors, trust firms, finance companies and insurance companies.
The new rules will for the first time allow underwriters to recommend a certain number of long-term institutional investors, such as private-equity investors, to participate in book building.
"The move may attract more long-term and quality shareholders to firms that issue shares," said Wang Lin, a CSRC official.
Underwriters of small and medium-sized companies will also be required to increase the number of share allotments in a tranche for institutions so the institutional investors will be more cautious when quoting prices.
In addition, the stock exchanges and clearing agencies should shorten the time between the completion of IPOs and the actual listings, the CSRC said.
The issuers and underwriters must make public their assessment of the stocks' valuations, according to the CSRC.
Under the new rules that will take effect on November 1, more institutional investors will be allowed to participate in the book-building process to work out a price range of new stocks, according to the China Securities Regulatory Commission.
At present, prices of IPO shares are worked out based on demand for them and market sentiment. A price range is worked out in consultation with six types of institutional investors - fund managers, domestic brokerages, qualified foreign investors, trust firms, finance companies and insurance companies.
The new rules will for the first time allow underwriters to recommend a certain number of long-term institutional investors, such as private-equity investors, to participate in book building.
"The move may attract more long-term and quality shareholders to firms that issue shares," said Wang Lin, a CSRC official.
Underwriters of small and medium-sized companies will also be required to increase the number of share allotments in a tranche for institutions so the institutional investors will be more cautious when quoting prices.
In addition, the stock exchanges and clearing agencies should shorten the time between the completion of IPOs and the actual listings, the CSRC said.
The issuers and underwriters must make public their assessment of the stocks' valuations, according to the CSRC.
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