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China allows IPOs to resume under new rules

China has ended a four-month moratorium on initial public offerings (IPO) and will allow 28 companies to list on the stock market by the end of 2015. It has also brought in new listing rules.11 Nov 2015

The 28 companies had been approved before IPOs were halted in July, state-owned news agency Xinhua said

New IPOs were stopped in July after the main market index fell 30%. Shares have rebounded more than 20% since then, Xinhua said.

China has frozen IPOs eight times in the past and a restart to listing usually reflects growth in investor confidence, Xinhua said, quoting Wei Wei, an analyst with Ping An Securities. Wei said that this re-launch came earlier than expected, "showing regulators' resolution and confidence in accelerating capital market reforms and their judgement that the market is back to normal".

Under the new listing rules investors no longer have to freeze large sums of funds in escrow accounts ahead of an IPO, but will now only pay after allocation of the shares is announced, Xinhua said.

IPOs were often oversubscribed by more than 100 times under the old arrangement, Xinhua said. In June, when 25 IPOs were due to list, nearly 6 trillion yuan (US$944 billion) were tied up. Under the new rules only 41.4 billion yuan would have been paid.

IPO procedures have also been streamlined for IPOs with fewer than 20 million shares, reducing the cost of listing for small and medium sized enterprises, Xinhua said.

The Shanghai Composite Index rose 1.58% on Monday, the first trading day after the announcement, Xinhua said.