Chinese regulators are considering suspending initial public offerings to stabilize the country’s tumbling stock markets, people familiar with the matter said.
The China Securities Regulatory Commission is meeting this afternoon with major brokerages, said another person, without saying what will be discussed. The people asked not to be identified as the regulator’s deliberations are private. CSRC officials didn’t immediately respond to a faxed request for comment.
Halting IPOs would head off any diversion of funds into new listings and would come on top of a weekend interest-rate cut that was viewed by some analysts as a move to curb Chinese equities’ plunge into a bear market. The Shanghai Composite Index dropped 3.3 percent on Monday, taking declines from its June 12 peak to more than 22 percent.
“Suspending IPOs will definitely provide some support to the stock market,” said Zhang Yanbing, a Shanghai-based analyst at Zheshang Securities Co. “There have been a lot of IPOs recently including several really big ones, putting pressure on market liquidity.”
July futures on the FTSE China A50 Index traded in Singapore rose 1.7 percent as of 5:46 p.m. local time.
Subscriptions for 28 upcoming IPOs on the mainland may tie up 4.03 trillion yuan ($649 billion) of liquidity starting early July, according to the median estimate of six analysts surveyed by Bloomberg. The 175 initial share sales in China this year have raised about $22.7 billion, data compiled by Bloomberg show.
China’s securities regulator has suspended IPOs eight times in the history of the yuan-denominated A-share market, five of which were imposed since 2000, according to a Xinhua News Agency report in April 2013.
The last moratorium was imposed in late 2012 and lifted in December 2013 as the regulator revised IPO rules to better protect individual investors from fraud and misconduct among advisers and issuers.
Government action helped the Shanghai gauge surge more than 150 percent in the 12 months prior to its June 12 peak, as authorities cut trading fees, made it cheaper to open new stock accounts, expanded investment quotas for overseas money managers and eased rules on margin lending. They also lowered interest rates three times before last weekend and reduced lenders’ reserve requirement ratios twice.
— With assistance by Steven Yang, Heng Xie, and Aipeng Soo