China's securities regulator will restart the initial public offering (IPO) approval procedure Friday after having suspended it for nearly two months, raising market concerns that the move might further drag down the already sluggish stock market.
The China Securities Regulatory Commission (CSRC) will review IPO applications from two companies - Shanghai Haohai Biological Technology Co and Beijing Zhongkuang Environmental Protection Science and Technology Co - on Friday, according to a statement on the CSRC's website.
The CSRC has not held any IPO approval meetings since July 31, when it granted approval to Hasee Computer Co's application to list on the Shenzhen Stock Exchange's Growth Enterprise Board.
"The regulator made this move because of increasing financing demand from companies. Some of them have been in the IPO pipeline for a long time," Li Ning, an analyst at ChinaVenture Investment Consulting Group, told the Global Times.
But the news worried some investors, who fear that new IPOs might divert funds from existing shares and hurt their interests.
An online survey by news portal sina.com showed 96.9 percent of the 133,341 respondents believed that the poor performance of the stock market was partly due to an excessive number of IPOs, and 91.8 percent said that a pause in IPO approvals would help shore up the market, the Xinhua News Agency reported on July 20.
Restarting the review of applications does not necessarily mean there will be an increase in new IPOs, but the move does make investors feel concerned and will have a negative effect on market sentiment, Huatai Securities Co said in a research note published Wednesday.
The benchmark Shanghai Composite Index fell below 2,000 points during daily trading and closed at 2004.17 points Wednesday, the lowest level in 43 months, dragged down by concerns over a share oversupply and the weakness in regional markets, analysts said.
However, some experts said investors are overreacting to the CSRC's latest move.
"Suspending the review of IPO applications has not boosted the stock market in the past two months, so a restart will not hurt much neither," said Dong Dengxin, director of the Financial Securities Institute at Wuhan University of Science and Technology.
Dong said the market might rebound following the National Day holiday, as the regulator wants a stable market during the upcoming 18th National Congress of the Communist Party of China.
"Some short-term speculators are also looking to enter the market when it falls below 2,000 points," he noted.
The CSRC has launched a series of measures to restore investor confidence in the stock market in recent months, including calling on State-owned enterprises to buy back their own shares, and sending officials to tour some overseas countries in a bid to lure foreign investors.
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