China weighs IPO freeze as stocks fall 8.5% in October
Key Facts
Reuters cited a Financial Times report saying China’s securities regulator had asked investment banks to halt initial public offerings and suspended large sales by existing shareholders until markets recover. The report was based on three people familiar with the discussions, Reuters said. The agency said it could not immediately verify the report, while Chinese financial authorities had not responded to a request for comment at the time of publication. Reuters reported that the regulator had held meetings with investment banks and issued informal guidance in recent days. The report comes as authorities use official tools to provide liquidity, after a month of sharp declines in Chinese stocks.
The People’s Bank of China announced swap operations with financial institutions that were expected to inject more than 100 billion yuan into the stock market. The bank said 31 brokerages and funds had applied for swaps worth more than 100 billion yuan as of 2 November. Support measures included upgrading the lending facility for share buybacks and urging large companies and index funds to support prices or build stock positions. Authorities were also considering easing margin rules to increase liquidity. These measures set out an official path for supporting the market alongside the IPO-related guidance attributed to the press report.
The moves reflect pressure that built up during October, when the CSI 300 lost 8.5% for the month, its worst monthly performance since early 2016, according to Reuters. The agency attributed the decline in investor confidence to a weak economy and falling technology stocks. In trading, the CSI 300 and Shanghai Composite indexes fell more than 1% in early trading on Tuesday 3 November. By midday, they had pared losses to 0.1% and 0.7%, respectively. This followed a 1.1% rise in the Shanghai Composite on Monday 2 November, its biggest percentage daily gain since 27 August.
Data from China’s National Bureau of Statistics showed that the official manufacturing purchasing managers’ index was 49.3% in October, down 0.8 percentage points from September. The new orders index also fell to 49.4%, down 1.1 percentage points, while the production index dropped to 49.8%, down 1.9 percentage points. The China Federation of Logistics and Purchasing attributed weak manufacturing to the fading of export orders linked to the Christmas season after September and weaker domestic consumption following the National Day holiday. New export orders and new consumer goods orders contracted. Weak demand and production indicators put pressure on the real economy in the background of efforts to stabilize stocks.
A study by the Bank for International Settlements found that China suspended IPO activity entirely three times between 2008 and 2015, with the pauses it examined lasting 214 days, 438 days and 156 days. The effect of those periods on the broader market trend was not consistent, according to the study. But it found that companies in sectors more exposed to competition from firms awaiting listing posted larger daily price returns when suspensions were announced, as did companies with similar risk characteristics. Stronger companies benefited less from news of the suspension. This provides context for the effects of offering restrictions on individual companies, without resolving their impact on the market as a whole.
These developments come amid changes in the listing market that have varied in recent years. Proceeds from Chinese technology company listings fell to $2.7 billion in 2024, from $15.7 billion in 2023, before recovering to $3.6 billion in 2025, according to Reuters. By contrast, proceeds from IPOs and secondary listings on the Hong Kong and Shanghai exchanges exceeded $54 billion during 2026 through 31 August, surpassing the more than $46 billion raised in the previous year, according to LSEG data cited by the Associated Press. The National Bureau of Statistics is scheduled to publish its October consumer price index report on 9 November. Markets are watching the report as manufacturing pressures overlap with efforts to support stocks.