Shenzhen Exchange Reinforces ChiNext Rules

The Shenzhen Stock Exchange has tightened the rules on how companies listing on the ChiNext start-up board may use extra funds from initial public offerings, reports the Wall Street Journal.


The newspaper notes that most of the 36 listed companies have raised more than double the amount they originally targeted for their IPOs. However, the exchange says such companies shouldn't use more than 20% of the additional IPO proceeds to supplement their working capital or to repay bank loans in a single year.


The additional proceeds, the exchange stresses, should be used to fund main businesses and not for high-risk investments, such as securities, derivatives or venture capital.


The Journal also reveals that the China Securities Regulatory Commission is mulling adjustments to the IPO-pricing mechanism in order to bring down the high valuations that have characterized recent listings and could contribute to an asset bubble.


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