(Yicai Global) June 15 -- The Shenzhen Stock Exchange reportedly asked 20 underwriters last month to explain the reasoning behind the high pricing of 35 initial public offerings on the bourse’s Nasdaq-like ChiNext market.

Some underwriters are acting unprofessionally and are even suspected of maliciously jacking up the pricing of IPO shares in their bids for the work, Securities Times reported today, citing an employee at the investment banking department of a leading securities trader. Some sponsors do this after taking onboard the issuers’ opinion, an industry insider noted.

Thirty-six of the 121 stocks that debuted in the Chinese mainland from January to April fell on their first trading day, versus 22 in the whole of last year. As a result, the Shenzhen and Shanghai exchange have fortify the supervision of IPO pricing since April. Since last month, none of the 17 firms that went public under the new registration system lost ground on the first day.

Reports on the investment value of IPO shares play an important part in their pricing. Shares issued under the registration system generally involve new industries and new business models, making it difficult for institutional investors to accurately assess the value, according to a staffer in the capital markets department of a securities trader in Shenzhen. Investors usually make offers based on the investment value calculated by the IPO’s underwriters

In April, the Shenzhen exchange spoke with or sent regulatory letters to the sponsors of five ChiNext IPOs and sent inquiries to 14 others. In the same month, the Shanghai Exchange met with brokerages to discuss how to enhance IPO underwriting. The heads of some said they would specify requirements for investment valuation reports and be prudent in appraising the value of new shares.

The price-to-earnings ratio of new shares issued under the registration system has also fallen since the start of May. The average P/E ratio of the 13 companies that have launched ChiNext IPOs since last month is 31.4, versus 78.4 in January, 37.4 in February, and 47.4 in March.

Editor: Futura Costaglione