Global Financial News

Some Chinese IPOs Pulled Due To Tightened Regs

Chinese firms are looking to pull initial public offerings (IPOs) after regulators have moved to strengthen requirements to safeguard investors and protect financial stability, Bloomberg reported.

Eighty-four companies have withdrawn applications this year, in comparison with nine last year and most of the past years, according to Bloomberg. The highest numbers of cancellations are being seen by the Shanghai Star and Shenzhen ChiNext markets.

Regulators have decided to tighten the rules after companies worked to raise capital in order to take advantage of the quick economic recovery and an earlier simplification of regulations, Bloomberg reported. The new rules are meant to better emphasize companies that have real tech credentials and higher financial standards.

One of the he recent deals in trouble is Geely Automobile Holdings’ plan to list with Shanghai Star. Regulators are looking into whether the firm is high tech enough, according to Bloomberg.

Firms had been rushing to list as China had introduced a registration-based system and new valuation limits, Bloomberg reported. That has resulted in a new growing backlog that has over 730 firms ready to sell shares this month.

This year, China has seen an influx of capital coming from a strong recovery from the pandemic and somewhat higher interest rates compared to more advanced nations, according to Bloomberg.

In separate news, Chinese regulators have been targeting the country’s youth, who have been engaging in more borrowing than usual as of late, taking on short-term loan debt not affiliated with traditional cards.

Fitch Ratings data showed around half of the short-term loans were made under digital arrangements in 2019. Many of those loans didn’t feature heavy involvement from issuers, although, under new regulations set to take effect in 2022, companies issuing loans will take at least 30 percent stakes in them.

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