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Report: China mulls over restrictions on valuations for domestic backdoor listings

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Report: China mulls over restrictions on valuations for domestic backdoor listings

The China Securities Regulatory Commission is studyingpossible restrictions to limit the number of overseas-traded Chinese companiesseeking backdoor listings in the domestic equity market, Bloomberg Newsreported May 10, citing "people with knowledge of the matter."

The securities regulator is considering placing a cap onvaluation multiples for deals involving companies that had traded overseas, aswell as implementing a quota to limit the number of reverse mergers fromcompanies formerly listed on overseas stock exchanges, the people said.

The proposed measures are aimed at keeping the stock marketstable as regulators are concerned that valuations for some domestic backdoorlistings are too high. The government also wants to avoid more buyouts thatcould trigger a wave of fund outflows and add to the depreciation pressures onthe yuan, the sources said.

The CSRC is studying the impact of Chinese companies lookingto relist domestically after delisting from overseas markets. The government isconcerned that the return of companies with strong brand names to the localmarket may suck in liquidity from smaller companies, said Ronald Wan, CEO ofPartners Capital International.

The regulator is still considering its options and has notdecided which of the possible rules it will carry out, said the people withknowledge of the matter.

The CSRC has not responded to Bloomberg's request forcomment.