THE securities regulator said it would strengthen supervision of initial public offerings (IPOs) of shares to reduce wildly speculative trade that contributed to a stock market crash.

    “We will improve the mechanism for consulting on prices, since having the prices decided by market factors is crucial for the whole market,” said Shang Fulin, chairman of the China Securities Regulatory Commission.

    When underwriters consult institutional investors on how to price an offer, the regulator will act if needed to ensure prices quoted by the institutions are directly related to their demand for shares, Shang said in a statement dated Wednesday.

    He also said the securities regulator would ensure offers were split fairly between institutional and retail tranches. These improvements would curb excessive speculation in the subscription phase and make the subscription process fairer, he said.

    In addition, the commission would supervise underwriters more closely to “strengthen their sense of responsibility” and make sure all offers of shares, including those by companies that had already listed, were conducted in line with market principles.

    The commission will also push development of the corporate bond market and discuss with the other agencies regulating that market how to promote investment in corporate bonds by insurers and commercial banks, Shang said.

    He said the commission aimed to unify the interbank and stock exchange markets in corporate bonds, but he did not give any timetable for resolving this politically sensitive issue.

    The division of bond issuance between two markets, which involves a complex application process to issue debt and inconsistent rules set by various regulators, is a major obstacle to corporate financing in China.

    The stock market’s sharp decline between last October and mid-April, which roughly halved share prices, was caused partly by rampant speculation in newly listed stocks, which soared to unsustainable highs on their debut. When the stocks eventually came down, they dragged down the overall market.

    The worst case was oil giant PetroChina, the most heavily weighted stock, which more than doubled in its Shanghai debut last November. It lost nearly two-thirds of its value in the following five months and briefly dropped below its IPO price last month, triggering panic in the market.

    Authorities intervened to support the market in late April with steps such as a cut in the stock trading tax, but they appear determined to prevent a repeat of the PetroChina debacle.

    When shares in Zijin Mining, China’s second-biggest gold maker, tripled from their IPO price in their first day of trade April 25, the Shanghai Stock Exchange suspended Zijin shares for half an hour — its first such intervention since China launched a flood of IPOs two years ago.

    The suspension prompted speculators to flee the stock and it has dropped sharply since then, closing at 11.56 yuan yesterday, above its IPO price of 7.13 yuan but well down from its first-day peak of 22.00 yuan. (SD-Agencies)