* Regulator tells brokers IPO resumption ‘almost certain’ at end-July -sources
* Resumption was expected after draft rules this month to reform IPO procedures
* Over 600 applicants waiting, but no rush of listings expected in weak market
* Mainland brokerages, hit by slump in investment banking fees, set to benefit (Adds CSRC no comment, analysis on outlook for listings, impact on brokerages)
By Hongmei Zhao
HONG KONG, June 18 (Reuters) - China is likely to resume approving initial public offerings at the end of July, sources quoted a senior regulator as saying on Tuesday, after a freeze since October as part of efforts to crack down on wrongdoing and restore investor confidence.
The IPO resumption, which had been expected around midyear, follows the release of draft rules early this month to reform IPO mechanisms, including greater freedom on the timing of listings and strict penalties for underwriters that give misleading information.
Given recent market weakness, analysts do not expect a rush of companies to market despite a long backlog of applications, although the resumption will be a boon for the mainland’s brokerages.
Yao Gang, vice chairman of the China Securities Regulatory Commission (CSRC), told brokerages at a meeting on Tuesday that “it is almost certain” that IPOs will resume at the end of next month, people who were present at the meeting said. They declined to be identified because they are not authorised to speak to the media.
Officials at the CSRC, which has never publicly indicated how long its IPO freeze would last, did not respond to Reuters requests for comment.
China suspended IPO approvals in late October as part of a crackdown on fraud in the equity market.
The number of IPO applicants in China has shrunk 17 percent to 666 from more than 800 last November, as companies dropped their listing plans due to accounting issues or a slump in profits.
The CSRC ordered underwriters to audit all applicants’ books and is conducting inspections on randomly selected cases to confirm their accuracy.
“It shows the CSRC’s determination to ensure that good companies go to the market,” said Edmond Chan, a partner at PricewaterhouseCoopers’ capital market services group in Hong Kong.
The IPO resumption would benefit Haitong Securities Co Ltd , China Merchants Securities Co Ltd and other mainland brokerages whose earnings have been hit by a slump in investment banking revenue over the past year.
It would also give applicants, many of which are not state-owned, badly needed access to the capital markets and boost the private sector as it struggles with slowing economic growth.
A number of Chinese companies, including city commercial lender Huishang Bank and Bank of Shanghai, have decided to turn to the Hong Kong market for fundraising after getting impatient waiting for a mainland IPO.
Analysts said, however, that companies are unlikely to rush to list once the IPO approvals resume.
“There won’t be a big flood. You cannot have too many deals at one time,” Chan said. “The market cannot absorb them.”
Recent market weakness, spurred in part by worries about prospects for U.S. monetary stimulus and affecting neighbouring Hong Kong and other global markets, last week pushed Shanghai’s CSI300 index to its lowest this year. (Additional reporting by Elzio Barreto in Hong Kong; Writing by Samuel Shen; Editing by Kazunori Takada and Edmund Klamann)