Price distortions cloud stock market

Source:Global Times Published: 2015-3-23 18:13:01

Premier Li Keqiang and Xiao Gang, chairman of the China Securities Regulatory Commission (CSRC), have each stressed on several occasions that the central government will vigorously promote a registration-based initial public offering (IPO) system in 2015. There is no doubt that a registration-based IPO system is fundamentally conducive to reforming how companies go public on the A-share market.

However, the more pressing matter for the government at present is to correct the current "distorted" pricing mechanism in China's A-share market. Fixing this problem will facilitate the smooth implementation of the registration-based IPO system.

The central government should take measures to correct the existing distortion. The first is to crack down on "back door listings." The second is to orderly promote the bankruptcy mechanism of listed companies, so to prevent garbage companies from taking up funds on the stock market and to teach investors that there are risks to the stock market.

The author is Yin Zhongli, a research fellow from the Institute of Finance and Banking at the Chinese Academy of Social Sciences.

21st Century Business Herald


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