New draft rules for dual share listings

The China Securities Regulatory Commission has proposed new rules for initial public offerings (IPOs), to make it easier for companies to sell shares in the mainland and Hong Kong simultaneously. The changes are expected to coincide with Industrial & Commercial Bank of China's (ICBC) listing in October 2006.

The rules introduce the possibility of a greenshoe option (over-allotment option), which allows a company's underwriters which are selling more than 400 million shares to sell additional shares at the original price if demand calls for it. Generally, the over-allotment will not exceed 15% of the original IPO scale. Greenshoe options can help reduce the volatility of listings and help stabilize share prices, while allowing more investment funds into the market.

Simultaneous, bidding by investors will also make the IPO process more efficient by allowing online and offline subscription of stocks by institutional investors and individuals, which is expected to cut the subscription period by two days. The changes will enable mainland and Hong Kong markets to have the same IPO issuance procedures, which is crucial to companies seeking dual listings as they can set the price at the same time.