FinanceAsia Magazine

Issue: November 2015

China this month lifted a short-lived ban on initial public offerings. The IPO ban was imposed in July amid a massive state-led effort to prop up the stock market, and scrapping it is an attempt by Beijing to return to the vision of President Xi Jinping for markets to play a decisive role in the economy.

But investor sentiment remains wary. The July market crash wiped $2 trillion off share prices in less than a month. 

Worse than the collapse was the government’s response, which went beyond using foreign exchange reserves to prop up the market. At one point half of China’s listed stocks were banned from trading and a crackdown on mis-selling ensued – one that has humiliated securities regulators, hedge fund managers, bank executives and journalists alike. 

So China has a credibility problem. 

Opening the IPO spigot is welcome but without complimentary reforms, it puts the regulators’ reputation at further risk. A brief rally followed by another tumble would only cause domestic and foreign investors to lose confidence. Yet recent history suggests this is what will happen.

The 2015 IPO ban is in fact the sixth time that IPOs have been suspended. In those cases, restarting the IPO process triggered short-term rebounds but not sustainable rallies. If anything, the new supply of listings served to ultimately put an end to bull runs, according to analysts at GF Securities.

This time around, Beijing has given the green light to just 28 companies in the long queue to go public; more will follow. The market’s two biggest shareholders, state entities China Securities Finance and Central Huijin, are among the top-10 shareholders of nearly 50% of A-share companies. In the summer they bought en masse, with six-month lockups. If market valuations return close to par, they are likely to embark on block sales.

Macro economic data is also against a drawn out rally. The latest figures show China’s slowdown is deepening and the administration’s growth target of 6.5% looks increasingly debatable.

Meanwhile investors are once again pushing up share prices in the hope more reform will quickly follow. However key changes such as moving from a regulatory approval system for IPOs to registration requires amending the Securities Law, which will take time.


About FinanceAsia Magazine

Established in 1996, FinanceAsia is the leading publisher of financial news in the Asia-Pacific region. Our combination of print and online products provide the latest news, analysis and insight into Asia’s financial markets.

Published monthly from our office in Hong Kong, FinanceAsia magazine provides our readers with the latest financial trends, interviews, features and investigative reports. The publication has a readership of key decision-makers at corporations, governments, investment and commercial banks, institutional investors, asset managers, brokers, traders and financial intermediaries.

Our regular sections include:

Data Story
We look at the key data behind a topical theme in Asian finance, showcased with an array of graphs and tables.

A monthly opinion column from the FinanceAsia editorial team. We provide our thoughts on a topic making the headlines.

Deal of the Month
Our regular two-page spread with its signature artwork and in-depth analysis examines the equity, debt or M&A deal that we feel has had the biggest impact on the Asian capital markets that month.

Investor Dialogue
For company CEOs and CFOs, what investors think is a critical concern, and in this column we help them understand just this. Each month we speak to a Chief Investment Officer of a top fund and outline their views on corporate governance, what stocks they like and where they expect to generate the best returns.

A monthly opinion piece from a respected author or commentator on Asian business, finance or economics.

People on the Move
Here we summarise the key hires, fires and moves at the region’s banks, highlighting at least one major move each month.

Deal Tracker
We examine the major primary markets deals of the month and comment on the quality of the debt or equity transaction and the secondary market performance.

The Arts of Finance
A light-hearted look at investment opportunities surrounding the arts business in Asia.