China relaxes rules for IPOs, share issues on Nasdaq-style stock board

SHANGHAI Fri May 16, 2014 6:15am EDT

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SHANGHAI May 16 (Reuters) - China has relaxed rules for firms to list or issue shares on its Nasdaq-style board in Shenzhen, which will support the growth of cash-short smaller companies and the continued outperformance of the so-called ChiNext market over blue chip stocks.

New regulations announced by the China Securities Regulatory Commission (CSRC) on Friday lower the financial requirements for firms to issue shares in the market and simplifies procedures, although rules were tightened for information disclosure.

For instance, any company which has made profits for two consecutive years can now apply to issue shares in the market, according to the new rules dated Wednesday, with immediate effect.

The previous rules announced five years ago had many restrictions such as how much profit firms must make before they can apply to issue shares on ChiNext.

"The new rules are aimed at standardising the securities issuance behaviours of the companies trading on the ChiNext market and protecting the legitimate rights of investors and the public interest," the CSRC said on its official microblog.

China launched its second board on the Shenzhen Stock Exchange in 2009, and since its establishment, the market has been the primary speculative target for retail investors, who dominate the country's stock market and tend to speculate in small caps.

The market's main index jumped to a record high of 1,521 points in late February, bucking the overall weakness of China's stock market, although it has since staged a correction to close at 1,232 points on Friday. (Reporting by Lu Jianxin and Pete Sweeney; Editing by Jacqueline Wong)

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