CSRC "Transmission": Suggest IPO allocations to be tilted towards core institutional investors.

Journalists have learned that recently, the China Securities Association has sent the latest issue of the internal publication "Transduction" to securities firms, with the theme of "Report on the Operation of the Hong Kong Stock Market in the First Half of 2025". Based on an understanding and observation of the Hong Kong market, the report puts forward suggestions for further promoting the stable and healthy operation of A-shares and advancing the registration system. The report suggests further leveraging the professional pricing role of institutional investors, and favoring core institutional investors in allocation. In the Hong Kong IPO distribution process, investment banks and issuers have more flexible autonomy in distribution, with allocations to sovereign and long-term funds usually significantly higher than short-term profit-driven hedge funds, thereby introducing high-quality long-term patient capital to companies. The report recommends identifying institutions such as funds, insurance companies, securities firms, QFII, which have strong research capabilities, long holding periods, and large capital size, as core investors, giving them more allocation to better fulfill the IPO's value discovery function. The report also suggests that for innovative companies in a high-growth phase, a tiered distribution can be considered for IPOs. Drawing on the current tiered distribution mechanism for unprofitable companies, it is recommended to increase the allocation to institutional investors in the offline market with higher lock-up ratios and longer lock-up periods. By increasing the proportion of shares locked by long-term investors, the report aims to play a stabilizing role in the long-term capital, nurture a long-term holding concept, and help investors better assess and understand the reasonable valuation of innovative companies in a rapid growth phase.