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The paradox of China's stock market (4)

(Xinhua)

08:46, November 30, 2012

When the supply of shares exceeds demand, the price will decline -- music that must be faced by both the regulator and investors, Hua noted.

One efficient way to resolve the imbalance is to lift the threshold for listing, said Hua, adding that market entrance standards should be made by taking both the profit and the scale of enterprises into consideration, while companies that have a tendency to blindly restructure assets after listing should be restricted.

As China's main stock market continues to fall, fewer companies have been permitted to launch IPOs. A total of 105 companies went public in the first half of this year, but the number of IPOs has dropped sharply to 50 so far in the second half of the year.

"The good days have passed for Chinese investors who have long looked to IPOs as a decent investment that could provide outsized returns to lift portfolios," said an investor surnamed Cao.

"Systemic flaws, such as a less market-oriented IPO mechanism, make it hard for the stock market to fully reflect a rebound in the economy," Zhang Gang, an analyst at Central China Securities, said, as quoted by the Wall Street Journal.


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