China extends freeze on IPOs

Continuing hike in bad loans forces extension.

The China Securities Regulatory Commission, the securities regulator, extended the freeze on initial public offerings after former chairman Guo Shuqing ordered an audit of offering documents in December. Xiao Gang, Guo successor, extended the policy and vowed boost investor protection and enforcement of securities rules.

Over a dozen regional banks have applied for first-time share sales on the mainland. Regional Chinese lenders are seeking ways to raise capital as bad loans in China’s banking system rose for a sixth straight quarter and CSRC maintains a freeze on reviewing new IPO applications that began in October.

Non-performing loans climbed by US$5.5 billion in the three months ended March 31 to US$85.8 billion The sixth straight quarterly gain marked the longest deterioration streak in at least nine years, said CSRC.

Because of this, Huishang Bank Corporation, a lender in Anhui province, is preparing for an IPO in Hong Kong that could raise about US$1 billion. Huishang has invited investment banks to bid for advisory roles.

Companies have raised US$4.6 billion from IPOs in Hong Kong this year, more than triple the amount for the same period of 2012. Financial-services firms account for two of the three largest IPOs in the city in the past 12 months.