The difficulties of staying afloat

With the once-hyped ChiNext beset by market doubts, could the expansion of the new third board and the international board restore market confidence? Raymond Yang investigates

In 2010, 347 Chinese companies listed on Chinese stock exchanges, accounting for 45% of all global IPOs. Zero2IPO Research Center predicts that in 2011, more than 400 companies will list. However, according to statistics from Wind Info, between early 2010 and early this month, the share price of 190 of the 473 A-share companies had dropped below their issue price.

“Half fire and half sea” is a good way to describe the current situation of the Chinese capital markets. On the one hand, with a constant stream of new issues, entrepreneurs, institutional investors and brokers are salivating at the prospect of a seemingly inexhaustible gold mine. On the other hand, new issues often fall below their issue prices, leaving individual investors trembling with fear. The new third board is due for expansion, and the long-awaited international board may arrive soon. Will these two boards, together with the ever-hot ChiNext, revive the fortunes of the Chinese capital markets?

This article examines the underlying issues. In the next China Business Law Journal, with analysis from experienced capital markets lawyers, we will look at whether the capital markets and the practice of securities law is facing a shake-up in the face of increasingly strict licensing and regulatory requirements.