China Stocks Slump as Regulator Moves to Accelerate IPO Approvals (FXI)

China stocks are slumping Friday morning following news that the China Securities Regulatory Commission (CSRC) is accelerating the pace of initial public offerings. The move is spurring concerns that funds will be diverted into the new stocks from existing shares, versus new funds entering the market.

The CSRC will begin to review and approve two batches of IPO applications each month from now on, versus one per month previously. The regulator approved 25 IPOs on Thursday.

The CSRC said rumors that it was boosting the stamp tax, resuming capital gains tax, and implementing greater controls over leverage risks in the stock market were untrue. Margin trading rose to an all-time high at RMB1.19 trillion ($191 billion) as of Thursday.

The Shanghai index gained 2.5 percent this week and has risen 91 percent over the past six months. The index now trades at 17.5 times expected earnings over the next 12 months, versus the five-year trailing average of 11 times.

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