Of the 10 firms that have applied to be on the Growth Enterprise Board (GEB) so far this month, 50 percent did not receive approval from the China Securities Regulatory Commission (CSRC).

Tianjin Sainteagle Welding failed to pass the review, according to an announcement released by CSRC late Tuesday, giving no further explanations.

Sainteagle has an annual production capacity of 30,000 tons of welding wires, according to the company's website.

Sainteagle was not alone. A total of five firms failed the CSRC's most recent round of reviews that started November 2.

Wuhu Annto Logistics and Jiangxi Hengda High-tech failed their committee reviews on November 13, according to an announcement on the CSRC's website. Still no explana-tions have been given.

But the success rate of the September applications of 31 companies for initial public offerings on GEB was a much higher 93.5 percent, with only two firms failing their reviews. Only one company later postponed their offering.

The fluctuation of Sainteagle's gross profits over the past three years may be the major cause of the company's failure, according to Shanghai Securities News.

Its gross profit rate oscillated from 18.5 percent to 27.34 percent in the past three years due to changes in the price of iron.

Analysts said controlling instability on GEB was the major reason the CSRC has been reviewing applications so strictly.

"GEB has inherent risks, and the government needs to be cautious," an analyst from a securities company, who declined to be named, said yesterday. "[Compared with November's applicants,] the first 28 companies had relatively good reputations," he explained.

Speculation on the board is also a pressing concern for the CSRC.

On the first day of trading, stocks soared 76.65 percent, with Huayi Brothers, a film and TV production company, leading the charge with a 122.74 percent rise.

But the second day saw big losses as 26 of the 28 stocks fell 8.15 percent on average.

"If the initial group of listed companies had been too small, it would have been easier for speculation to drive the prices up much more," the analyst explained.

Dong Chen, director of the research institute of Southwest Securities, said that Chinese regulators generally prefer stricter oversight to protect the interests of investors.

Experts on the committee may hold diverging opinions over the competitiveness of several companies, Dong added.

"Some of the companies that want to get listed on GEB do not own their core technolo-gies or are involved in industries with an uncertain future," Dong said. "There would be problems later if the CSRC did not review them carefully."

Editor: Guo Changdong Source: Global Times