A long-anticipated registration-based system for new share sales is likely to be launched next year after the Shanghai and Shenzhen bourses complete a detailed draft of listing rules and requirements, a former member of the securities regulator's review committee for initial public offerings said on Thursday.
"The likelihood of the registration-based system being introduced this year is very slim," said Wang Yang, head of A-share business at accounting firm Ernst & Young LLP. She had served as a member of the main board IPO committee of the China Securities Regulatory Commission during the past three years.
There will be a transitional period of about two months for the switch from the approval-based IPO system to a registration-based one. During the initial phase, the CSRC will continue to issue guidance regarding IPO prices to protect investors' interests, according to Wang.
The country's top legislature is expected to finish the review of the revised Securities Law in October, which is a precondition for the introduction of the new system. It will take time for the stock exchanges to establish specific listing requirements for the different boards in line with the law, she said.
The revised law is expected to abolish certain financial requirements for new share issuers, including a profit track record.
The regulator has speeded up the approval process for IPOs this year, making the country the leader of the global IPO market with 241 deals raising a total of $40 billion in the first half of the year, according to a report by E&Y.
In the first half, the Shanghai and Hong Kong stock exchanges were ranked first and second in the world IPO market in terms of funds raised. Shenzhen topped the list by the number of deals.
"China will continue to play a leading role in the global IPO market with more mega IPOs to come both in Hong Kong and the Chinese mainland, led by financial and industrial companies," Terence Ho, head of the strategic growth markets business for greater China at E&Y, said in Beijing.
"The regulator will allow more companies to list in the second half of the year so as to clear the IPO pipeline ahead of the new registration-based regime," he said.
The Shenzhen-Hong Kong Stock Connect program will be launched by the end of this year at the earliest, Wang said.
The initial investment quota will likely be similar to the amount under the trading link between Shanghai and Hong Kong. But the types of eligible stocks will be "quite different", with more emphasis on smaller and high-growth companies, she said.
