IPO resumption reignites market spirit, reform drive

While withdrawal of funds before an IPO often led to sinking stock prices, the return to the market after subscriptions sent prices high, leading to market instability.

"The reforms will help reduce speculation and cyclic disruptions," Guan said.

Viewed against the backdrop of China's economy, the reforms will have broader repercussions.

They will bring down the yields for IPO subscriptions, helping strain the overall liquidity and boosting the funding costs for other parts of the market, said Guotai Junan Securities analyst Ren Zeping.

Funding difficulties are among the biggest headaches troubled Chinese enterprises, especially small and private firms, at a time of economic slowdown.

The changes on Friday also eliminated the bookbuilding process for IPOs with fewer than 20 million shares, which will streamline IPO procedures and reduce their listing costs.

That will benefit small- and medium-sized enterprises, making it more convenient for them to seek funds from the stock market, said Wei.

Unlike in more mature economies like the United States, the stock market only contributes to a small part of corporate financing in China, though the government has long called for an increase.

Direct financing, including stocks and bonds, took up less than a fifth of the country's total social financing, according to official data for the first eight months of 2015.

As banks are reluctant to lend to small companies for fear of risks, the stock market is increasingly viewed as an alternative.

A larger share for direct financing has been written into the Communist Party of China's proposals for a new five-year development plan for the 2016-2020 period. To achieve it, an overhaul of the IPO rules is a must.

Authorities have set the reform target to allow firms to go public without the current administrative approvals, by phasing in a registration-based system that relies on full and truthful information disclosure

Friday's moves were viewed as a major step in that direction. Regulators will remove some criteria for IPO approvals and strengthen requirements for information disclosure instead.

That signifies a shift of focus from administrative approvals to information disclosure for IPOs.

"This effectively provided policy support for the finishing touch on registration-based IPOs," Dong Dengxin, a securities researcher with Wuhan University of Science and Technology said.

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