China’s securities regulator is barring companies from selling new shares to fund investments in non-core businesses such as internet finance, online gaming and virtual reality, in a bid to head off a speculative bubble, according to local media. As China’s economic slowdown has slammed traditional industries such as manufacturing and construction, investors have piled into sunrise industriesincluding technology, finance and media. In a bid to renew their fortunes and boost stock prices, listed companies in declining sectors have made abrupt shifts into new business lines, often signalling them witheye-catching name changes designed to capture investor interest.
The China Securities Regulatory Commission will no longer approve private share placements by companies in traditional industries if the purpose of the fundraising is to invest in “virtual” sectors outside the company’s core business, Caixin, a respected business news website, reported on Wednesday, citing an unnamed person close to regulators. The CSRC will also tighten approvals of mergers and acquisitions where a traditional company targets these sectors. In one example, Shenzhen-listed landscape engineering company Lingnan Landscape said last month that it would spend Rmb375m ($57.6m) to acquire a virtual reality company.