China Outlines New Rules for IPOs

China's securities regulator unveiled guidelines on new rules for the country's initial public offering system, in its latest effort to curb overly high pricing of new shares and shore up confidence among investors in a slightly recovering market.

The reform is aimed to make the pricing of new offerings better reflect the issuer's fundamentals. China's stock market has been plagued by abnormally high pricings of new offerings and the subsequent reverse in earnings growth of the issuer after the listing, as well as continuous weakness in newly-listed companies' shares.

The guidelines on new rules comes as a growing list of state-run firms are eager to tap a slowly recovering domestic stock market. The benchmark Shanghai Composite Index has gained 9% so far this year, after dropping 22% in 2011.

Analysts said the stock market is unlikely to react too much to the reform. "Potential impact from the reform is likely to be limited as it's more focused on technical adjustments in the pricing procedures [instead of fundamental reform of the IPO system]," said Jiang Shiqing, an analyst with Industrial Securities.

In guidelines posted on its website Saturday, the China Securities Regulatory Commission said it will strengthen information disclosure, improve the pricing procedures and increase shares to be floated after the IPO.

The commission reiterated it will push ahead with the establishment of a share offering system focused on information disclosure, requiring issuers and intermediaries to improve their disclosure. It didn't offer a timetable for the reform.

Among other measures to increase the transparency, the regulator said it will disclose preliminary prospectus from an issuer earlier, and is aiming for releasing the preliminary prospectus after it receives the IPO application from the issuer, offering more time for the public to oversee the IPO. Currently, the regulator published the preliminary prospectus after a feedback.

The regulator said it will expand the scope of investors that take part in the inquiry of new offerings by allowing the underwriter to recommend five to ten individual investors to engage in the process. At present, only institutional investors, including fund managers, brokerages and trust investment companies, are allowed to make an offer in an IPO.

The securities watchdog also said it will increase shares available to institutional investors with an aim of making their offers more reasonable. Under the new rules, no less than 50% of new shares planned for sale will be sold to institutional investors. Currently, no more than 20% of new shares will be allocated to institutional investors if the offering is less than 400 million shares; no more than 50% of new shares after deducting the part for strategic investors will be sold to institutional investors if the offering is above 400 million shares.

To strengthen its supervision on the pricing procedure, the regulator said the issuer should disclose further information on its pricing and planned projects as well as potential risks if its pricing is 25% higher than the average level of its peers, and the regulator could require a fresh round of inquiry after reviewing further information on the offering.

The 25% level is a "trigger point" for additional disclosure, not a ceiling for pricing, the regulator said in a separate statement.

The regulator said it will increase share supply by allowing more shares of newly-listed companies to be floated after the IPO.

It will lift the three-month lock-up period after the offering for new shares acquired by institutional investors and encourage an issuer's existing shareholders who have had holdings in the company for three years to sell their stake to new institutional investors in IPOs, according to guidelines.

Geithner: U.S. Can Withstand Any Europe Stresses

U.S. Treasury Secretary Timothy Geithner said that if Europe mismanages its crisis it could slow U.S. growth but said the U.S. financial system could handle any resulting pressures.

"The U.S. financial system is in a very strong position to withstand the foreseeable pressures we might face from Europe," he said.

Geithner said that, on balance, Europe was making headway in efforts to deal with its sovereign debt crisis.

"I think they've made a lot of progress in the last few months in trying to bring back a measure of calm to their financial markets," Geithner said.

Concern about spillover from Europe's crisis led member countries of the International Monetary Fund to agree last weekend to pledge an additional $430 billion to strengthen its war chest in case other countries are adversely affected.

Geithner, who heads to Beijing with Secretary of State Hillary Clinton next week for the latest round of Strategic and Economic Dialogue talks between the two countries, was cautious when asked to assess relations between the two countries.

"Better. Better than it was," he said, noting that a 13 percent real appreciation in the yuan's value was "pretty good for us" because it reduces the competitive price advantage that Chinese-made goods hold over U.S. products.

Geithner and Clinton will discuss a full range of issues, potentially anything from cooperation on efforts to curb Iran's nuclear ambitions to currency values in two days of talks May 3-4. He cited progress in several areas.

"There's better protection for intellectual property rights in China, less piracy against U.S. firms, and China is gradually dismantling a range of the subsidies that their firms enjoy which gives them an unfair advantage," he said.

There was still work to do, Geithner added, but "the basic direction of reforms in China is fundamentally in our interest."

Officials Say India May Increase Cotton Exports

An Indian ministerial panel may allow more cotton exports during this marketing year on Monday, following the expectation of a higher production and lower demand from local textile mills, two senior government officials said Sunday.

"There is likely to be some relaxation in exports as Cotton Advisory Board as well as the farm ministry have raised their estimates for cotton output this year," one of the officials, who declined to be identified, told reporters.

The panel may consider allowing up to 2 million bales of more cotton shipments during the marketing year ending Sept. 30, said another official.

India, the world's second-biggest cotton producer, has already exported 10.6 million bales of the fiber so far while another 900,000 bales will be shipped over a span of next few weeks, the official added. Each bale weighs 170 kilograms.

India's series of policy flip-flops on cotton exports has created uncertainty for potential customers. The government on March 5 banned cotton exports following sudden jump in shipments, but the Trade Ministry was forced to revoke the ban within a week due to fury from Indian cotton-producing states and Farm Minister Sharad Pawar, who said the move would deny farmers better prices.

However, the Trade Ministry allowed shipments of only those quantities which were registered before the ban and still restricts any fresh export registration. Industry executives said there are enough cotton available for local mills. India's 2011-12 cotton output is expected to rise to a record 34.7 million bales, while mill consumption is expected to decline about 5% to 21.1 million bales.

Separately, Trade Minister Anand Sharma said the government will look into the interests of farmers, textile mills as well as other stake holders, while deciding on further cotton exports.

Wall Street Ends Last Week on Strong Quarterly Earnings

"The tone is positive; earnings have generally been better than expected and some of the housing data this week is showing improvement," said Andrew Fitzpatrick, director of investments at Hinsdale Associates Inc.

Manufacturing, auto sales, jobs reports and LinkedIn earnings round out what investors should keep on their radar for this week. "It's a bit of a delayed reaction, but the general sentiment this week has been strong, and the market has reverted back to the weekly sentiment," he added.

Up 1.8% from last Friday's close, the Dow Jones Industrial Average rose 53.28 points, or 0.4%, to 13,257.90, with American Express Co. leading gains that included 24 of its 30 components.

Dow component and consumer product company Procter & Gamble Co. retreated 4.9% after cutting its profit forecast for 2012.

The S&P 500 added 5.45 points, or 0.4%, to 1,405.43, with the index readying for a 1.9% gain for the week.

Consumer discretionary fared best and energy was the sole laggard among its 10 major sectors.

On a technical level, the S&P has had trouble holding 1,400. "One of these days it is going to move on, so if it can hold there, that's a positive sign," said Fitzpatrick of the level breached, but not held, in nearly four weeks.

Among stocks weighing on the S&P 500, Principal Financial Group Inc. fell 5.8% a day after the insurer and asset manager reported a quarterly operating profit below Wall Street's expectations.

The Nasdaq Composite rose 21.56 points, or 0.7%, to 3,072.11, a level that has it on track for a weekly rise of 2.4%.

Ford Motor Co. reported higher-than-anticipated profit as robust results in North America helped stem soft international demand.

Amazon.com Inc. rallied, with shares of the online retailer rising 16% after its profit and sales topped estimates. For every stock sliding more than two gained on the New York Stock Exchange, where 381 million shares traded as of 2:15 p.m. Eastern Standard Time.

Stock indexes maintained their gains after the Commerce Department reported the U.S. economy expanded less than expected in the first quarter.

"The increase in consumption coincides with the strong rally in the stock market, perhaps underscoring the Fed's implied wealth effect goal," noted Dan Greenhaus, chief global strategist at BTIG LLC, of the better-than-expected 2.9% hike in household spending in the first quarter.

Wall Street took in stride Standard & Poor's downgrade Thursday of Spain's credit rating, with the agency saying the government's finances would likely deteriorate more than previously thought.

"We've swung from despair late last year to reasonable optimism and now at best that optimism is being tempered back," Tony Norris, co-manager of the Wells Fargo Advantage International Bond Fund in London, said of the global economy.