* Wei says regulators' paternalistic approach on IPO
regulation should change
* Comments come as Beijing is trying to raise standards of
By Melanie Lee
TIANJIN, China, Sept 12 Chinese regulators
should do more to protect investors and not just focus on a
company's business model when vetting initial public offerings,
the co-chief executive of Morgan Stanley's Asia
operations said on Wednesday.
The comments from Wei Sun Christianson, one of the top
investment bankers in the region and the longtime head of Morgan
Stanley's China business, come at a time when Beijing is trying
to put in better safeguards to raise the standards of its
capital markets system.
Still, those efforts face steady resistance from a system
that has for many years favoured the politically connected.
China's IPO selection process, done by politicians and not
capital market experts, is what some critics say allowed many
companies to go public that were not ready, or worse, had faulty
accounting in place.
In 2011, a batch of Chinese companies that went public in
both Greater China and abroad saw their shares plunge, with
dozens delisted, after accounting scandals emerged at the
"One of the things that needs to be focused on is, instead
of looking at the profitability -- the business model of the
company -- they should focus more on things like protection of
the interests of the investors," said Wei, speaking on a panel
at the World Economic Forum.
Morgan Stanley co-founded Chinese investment bank CICC in
1995 and in 2006 obtained a wholly-owned commercial banking
license. The Wall Street bank later sold its stake in CICC and
in June 2011 launched a securities joint venture with Chinese
Most major stock exchanges approve IPOs through a listing
committee comprising financial market experts and professionals,
to determine that the company is ready to be publicly traded,
and that shareholders will be protected when the shares start
In China, IPOs tend to be approved in batches, in a process
that prior to this year, was lacking in transparency, and was
criticized for being political in its execution.
MOVING AHEAD ON REFORMS
The Chinese authorities are keen to create a more
professional image for their stock markets, in line with their
ambition to make Shanghai a global financial hub by 2020 to
rival New York and London.
They are pushing ahead with reforms, including steps to
internationalise the yuan, which they hope will one day rival
the dollar as an international reserve currency.
In nearly a year as China's top securities watchdog, Guo
Shuqing has let loose a flurry of reforms targeting insider
trading, market manipulation and dodgy disclosure that have
hamstrung China's stock markets even as its economy has grown.
But China's more than 72 million retail investors, who
account for about three-fourths of trading on the domestic stock
exchanges and have been burned repeatedly in the weak and
volatile markets of recent years, remain sceptical.
"The IPO process is pretty unique in the roles played by the
regulator," Wei said on the panel. "Even now, I think the
regulators continue to play a paternalistic kind of role in
supervising and regulating the market. I think it's time the
regulators started thinking about change."