(Clarifies that suspension of IPO rules applies to all mainland
exchanges, not just two main boards, in paragraph 6)
* China to allow individual investors to invest in OTC
* Trusts, wealth management funds also to participate
* Move follows effective suspension of IPOs on main boards
* Regulators encouraging firms to seek alternative funding
SHANGHAI, Feb 18 China is giving investors
greater access to its over-the-counter (OTC) market as Beijing
moves to expand access to credit for small, privately-owned
firms that are now largely shut out of the county's financial
The new rules, published by China's National Equities
Exchange and Quotations Co Ltd (NEEQ), which operates the OTC
markets, allow participation by individual investors with over
two years of investment experience and 3 million yuan ($481,300)
worth of securities assets, and by new classes of institutional
investors including trusts and wealth management funds.
The regulations, which are effective immediately, also
lifted a previous restriction that limited investors to 200 per
China's OTC market, which focuses on facilitating private
placements in smaller Chinese companies - in particular
technology firms - was originally launched in Beijing in 2006,
with around 200 firms trading on the platform.
But analysts and participants complained that the lack of a
clearing mechanism for trades, plus the limit of 200 investors
per issue, kept it short on liquidity.
However, the China Securities Regulatory Commission (CSRC)
has recently begun encouraging firms currently stuck in queues
for listing on mainland exchanges to consider alternative routes
to raising capital.
In addition to encouraging companies to look into bond
markets, the CSRC has already lowered administrative barriers to
listing abroad and has now increased access to another capital
channel by increasing access to the OTC market.
In the name of rebuilding market confidence shaken by
stories of insider trading, the CSRC has effectively suspended
consideration of IPO applications until March while
underwriters, auditors and regulators double-check financial
statements of applicants.
The suspension also satisfied a long-standing petition from
mainland investors that IPOs be halted in order to prevent new
issues from diluting valuations, and is credited by some
analysts for setting off a massive rally that has seen the
Shanghai Composite Index gain around 25 percent since
($1 = 6.2325 Chinese yuan)
(Reporting by Pete Sweeney; Editing by Kim Coghill)