Chinese shares close higher (Second Lead)

Investors are concerned about the impact of imminent changes to the system for initial public offerings (IPOs), which could see China moving from an approval-based system, toward a U.S.-style registration-system, potentially boosting share supply.

The amount raised by Shanghai, which is just behind that raised by the New York Stock Exchange (NYSE), is quite significant considering that China’s Securities Regulatory Commission (CSRC) earlier in the year banned all IPO listings from July to November in an attempt to curb the country’s summer market correction.

The cabinet could do so and implement a new IPO mechanism as early as on March 1 next year, Xinhua reported. Hong Kong stocks ended modestly higher today, helped by calmer trading in mainland China after a sharp fall in the previous session.

“It is not merely about delegating the IPO approval power to the stock exchanges but a major transformation of the regulator’s role”, the CSRC said.

The Hang Seng finished modestly higher on Tuesday following gains from the financials, properties, utilities and oil companies.

China’s State Council says the new IPO system is expected to be implemented within two years.

“A confluence of bad news has deepened market pessimism”, said Alex Kwok, chief analyst and head of research at China Investment Securities (HK).

For the day, the index collected 80.00 points or 0.36 percent to finish at 21,999.62 after trading between 21,881.71 and 22,024.28 on turnover of 37.86 billion Hong Kong dollars.

To counter the possible negative effect of the reform, China’s top securities regulator vowed on Sunday to press ahead with stock listing reforms in an active, steady and orderly way.

Amid concerns that the new IPO system will dampen demand for existing equities, investors dumped A shares on Monday, with the benchmark Shanghai Composite Index declining 2.59 percent, the biggest loss in a month, to close at 3,533.78 points. But initially, it will still control the pace and pricing of IPOs to maintain market stability.