Analysis-Chinese firms' fundraisings in limbo as IPOs scrutinised at home and abroad

Sail GP Halifax: The Extreme Race Experience | SaltWire #racing #sailing #catamaranSHANGHAI/HONG KONG - Chinese companies are staring at the prospects of a drought of new equity capital as tougher domestic IPO rules and challenges in listing overseas severely curb their fundraisings, putting at risk the floundering economy's recovery.

The sudden freeze of an IPO market that was the world's biggest in 2023 and 2022 comes after the securities watchdog, under new chairman Wu Qing, vowed to step up scrutiny of listing candidates and crack down on any lapses. For venture capitalists, the difficulty to exit will, in turn, lead to difficulty in fundraising, and"it would be increasingly challenging to invest in early-stage, small, hi-tech companies", said Qian.

Raising debt and private capital is tough too for small-sized companies, mainly technology startups, due to their early-stage business models and weaker credit profile. This is likely to leave some with little choice other than to rein in growth plans and cut costs. With the tighter scrutiny and shrinking liquidity triggering uncertainty about domestic listings, many companies are giving up hopes to list - more than 80 IPO candidates in China have terminated their plans to list at home so far this year.

"There's more certainty in Hong Kong's stock market. Or put it another way, there' re very clear rules in that market," said Tang Jinghua, chairman of Shanghai Voicecomm Information Technology Co, which got CSRC's nod this month.

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