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In the News

China imposes financial reviews for IPO hopefuls

CHINA, under pressure to raise the quality of its IPOs, has asked underwriters and auditors of firms looking to list on the mainland markets to review their financial statements and ensure that all is in order.

After their review, the China Securities Regulatory Commission will randomly select from the nearly 900 initial public offering applicants and conduct its own checks, it said in a statement yesterday.

It dovetails with the CSRC's push to restore investor confidence in the stock market that has been rocked by reports of insider trading and other wrongdoing.

The CSRC will focus on areas such as fraudulent and illegal transactions as well as loss provisions, the statement said after a closed-door meeting between the securities regulator and underwriters.

"This is apparently aimed at weeding out some unqualified IPO applicants," said Liang Jing, an analyst at Guotai Junan Securities Co. "It will add more burden to underwriters, and obviously, some deals would have to be cancelled."

The reviews, or so-called self-inspections, will last until the end of March.

This could mean China's IPO market, frozen for almost three months by regulators worried that additional supply would further hurt the stock market, could be put on hold until the end of March, analysts said.

The CSRC has rolled out measures in recent weeks to ease funding pressure on the stock market, where 882 companies are queuing to be listed.

China has lowered the bar for companies to list in Hong Kong instead and has encouraged firms to raise money through the bond market and over-the-counter equity market.

The CSRC will also reject IPO applicants for the Nasdaq-style ChiNext board which have reported a drop in profit in 2012 compared with a year earlier.

IPO issuance on the Chinese mainland plunged 64 percent in 2012 from the previous year to US$14.4 billion, according to Thomson Reuters data.

Edward Lehman 雷曼法学博士
Managing Director 董事长

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