Chinese regulators have told investment banks to bar low-quality enterprises from flooding the initial public offering market and keep offering prices low, aiming to revive retail investor confidence in the stock market, the Financial Times reported, citing sources.
Recent listings such as Chinese chip maker CXMT Corporation and Unitree Robotics have attracted significant attention and have drawn enormous investor interest. Both were priced below the norms typical of Western exchanges, and each saw its share price surge more than fourfold on debut.
The sources said that Chinese regulatory officials recently met with some senior domestic investment bankers, reiterating their preference for conservative initial public offering pricing. Amid a surge in listing applications fuelled by recent IPO successes, regulators also aim to prevent a new listing frenzy, particularly among companies that are not being recognized by the nation.
The mainland has attracted over 100 listings so far this year, raising more than US$28 billion, according to HSBC – nearly 50 percent more than last year – with the median first-day IPO return reaching 1.73 times.
Chinese new listings were almost typically capped at 23 times the price-to-earnings ratio – a practice that fuelled sharp share price swings and put retail investors at greater risk.
Since the launch of the Shanghai Stock Exchange STAR Market in 2019, listed companies' valuations have varied by enterprise and sector. On the STAR Market, loss-making but strategically significant tech firms can be valued on sales rather than profits.
