THE securities regulator unveiled new rules Friday to restrict “excessive” and “frequent” fundraising by some listed companies, with a focus on private share placements.

A listed company’s private share placement plan must not exceed 20 percent of its share base, and should not be made within 18 months of a previous fundraising by the firm, the China Securities Regulatory Commission (CSRC) said in a statement.

In addition, non-financial companies with “relatively big” holdings in financial assets or wealth management products were barred from applying for additional fundraising.

The new rules were effective immediately.

Deng Geng, a CSRC spokesman, said that the new regulation is intended to address some of the serious problems with the existing system for refinancing, including the excessive financing by listed companies and using the proceeds for speculative trading.

“It has led to a short-term chase of profits and hurts the effective resource allocation and the formation of long-term capital in the market,” Deng said at a news conference Friday.

China’s private placement market jumped five-fold from 2013 to 1.18 trillion yuan (US$172 billion) in 2016, dwarfing the market for initial public offerings (IPO), which raised just 147.6 billion yuan last year.

It is believed that a large portion of the capital raised by listed companies has been channeled into the wealth management market and high yielding and risky financial products through the shadow banking sector.

Wang Jianhui, director of the research center at Capital Securities Co., said the restriction on refinancing underscored the regulator’s intention to channel more capital into the real economy and curb speculation that could lead to greater financial bubbles.

The CSRC’s move to more closely supervise stock market fundraising also comes as it speeds up approval of initial public offerings. The regulator last month said it would take steps to control listed companies from frequently refinancing or raising too much at one time.

Ken Chen, a Shanghai-based analyst with KGI Securities Co., said that the move would help free up liquidity for IPOs.

“The cooling in economic growth and rising interest rates are making IPOs a very attractive financing channel for companies,” he said.

“The market would be under too much liquidity pressure if secondary share sales go at the current speed and scale.”

More than 600 companies are seeking approval for IPOs, Fang Xinghai, vice chairman of the CSRC, said during a panel discussion at the World Economic Forum in Davos, Switzerland, last month.

“Reform of our capital market still falls short,” Fang said. “Should our reform be more successful, we wouldn’t have had such a long IPO backlog and our contribution to the Chinese economy would be bigger.”

The regulator approved 45 IPOs in December, the most since 1997. Such activity has led to rising concerns of a supply glut in the world’s second-biggest stock market. A rush of new listings could drain demand, as investors chase the 44 percent first-day gains, the maximum allowed under China’s trading rules and the amount by which many IPOs jump in their debuts.

There have been 295 IPOs in China’s A-share market since Feb. 20, 2016, when Liu Shiyu became CSRC chairman. The companies raised 178.5 billion yuan in total.

Firms raised US$162.6 billion through more than 500 additional share offerings over the past 12 months. Firms raised US$18.3 billion in January, the most since September. (SD-Agencies)