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Pricing system for IPOs to be revamped

CHINA'S securities regulator has stressed the importance of supervising companies preparing to list on the Growth-Enterprise Market and is likely to revamp the pricing mechanism of new stock sales before they are offered on the board.

Sponsors of IPOs must offer specific views on the potential for growth and innovation of any company they are backing, as well as oversee the companies' operations and offer follow-up reports with regular statements, the China Securities Regulatory Commission said in its guidelines on the new platform yesterday.

Companies preparing to raise money on the GEM can't have changed their core business, their board directors, senior executives or controlling shareholders in the past two years, it said.

"Tightening the supervision of listed companies is a key measure to help protect investors and enhance the quality of the board," said Chen Siyu, an analyst at Guotai Jun'an Securities.

Risk-management measures also include publishing a prospectus of the IPO on Websites appointed by the commission, informing investors about risks of the board and punishments when a company fails to meet its estimated profits.

IPO price is another concern among investors as the market is filled with speculation that the watchdog will launch a new price-setting mechanism before resuming IPOs. Chinese mainland suspended IPOs in September last year due to the sagging stock market.

The regulator is very likely to issue a new price-setting mechanism before launching the new board, Caijing Magazine quoted a source close to the commission as saying.

The commission introduced the current price-setting mechanism in 2005. Prices of IPO shares are fixed based on demand for the shares and market sentiment.

Fan Fuchun, vice chairman of the commission, last month said the resumption of IPOs will be closely related to a new price-setting mechanism.


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