China is ready to be a game-changer in stock-market sector. The new bourse will relax rules on listing and trading. Trading expected to begin within two months. What’s the plan?
A “Star is Board”. China officially launches technology innovation board now called SSE Star Market. While China has some of the world’s biggest technology companies, many are listed in the US and Hong Kong. Today Shanghai new Nasdaq-style tech board is reality. China is ready to be a game-changer in stock-market sector and Shanghai board main target is to compete with New York and Hong Kong while Beijing is aiming to boost funding for its hi-tech pupils.
Huang Hongyuan, chairman of the Shanghai Stock Exchange, told the Lujiazui Forum in Shanghai that some companies will be traded on the new “STAR Market” board within two months.
The new board, China’s last attempt to regulate finance sector, is a pet project of President Xi Jinping. In November, Xi announced that he wanted a new tech board at the Shanghai Stock Exchange to support the country’s technological innovations and yesterday vice-premier Liu He pressed the button at the Lujiazui Forum to start the much-hyped new tech board. Insiders expect a first batch of more than 20 companies will debut on the board within a month of actual trading beginning.
What’s the plan? The “Science and Technology Innovation Board” is a key initiative by PRC to provide domestic funding support to Chinese hi-tech and innovative start-ups, allowing “New Made in China” products to compete on a global level in areas such as microchips, self driving cars and automation. But the new hi-tech board is clear response to investors – both Chinese and foreigners – to a better environment of Chinese stock market.
“We will fully enforce a share offering system that is based on information disclosure, supporting the growth of technology firms to make breakthroughs in innovations in core technologies,” said at the launch Yi Huiman, chairman of the CSRC. Yi Huiman also underlined that difficulties remain in reforming the mainland’s capital market, but the launch of the tech board will help the regulator to ensure fairness and transparency.
The new China’s Nasdaq-style board will adopt a registration-based initial public offering (IPO) system to facilitate companies’ fundraising.
Finally, after several debacle the new Shanghai tech board being the latest attempt to create China’s NASDAQ. What’s been the response? Actually everybody is very excited. Actually, the most crucial change is the adoption of a registration – base listing system, which replaces the pronged regulatory vetting that kept many companies waiting for more than a year before listing.
It will adopt a registration-based initial public offering (IPO) system to facilitate companies’ fundraising. Under the new IPO mechanism, companies are required to fully disclose information about their earnings and operations while regulators will give them a green light once they ensure the truthfulness of the information.
According to the new rules, companies listing on the new board can trade freely for the first five days and will be subject to a 20% limit before is halted the 6th day of trade. These trading caps were useful in preventing excessive ramping of share prices avoiding the boom-to – bust cycles risk.
How does the fact the Chinese exchange are approved-based, and not registration-based, affect listings?
In details, as SCMP revealed, unprofitable companies that have a minimum of 300 million yuan ($US44.6 million) of sales in the previous year are also eligible to file an IPO application. Pre-revenue biotech firms that have a market value of at least 4 billion yuan (US$595.5 million) are also eligible if they obtain licences from the national drug authorities. Of course the Shanghai exchange will review IPO applications, conducting a careful screening on earnings and operations before granting share listing approvals.
Chinese officials said with trading expected to begin within two months, but there are still uncertain over execution, timeline and core criteria of this new board. Without doubt People’s Republic new Nasdaq-style tech board will be a game-changer. The new rules already fuleded hopes among players and investors. But, without doubts, US stock market is still by far for Shanghai new board. Hong Kong might be a more realistic goal, maybe the final result will be a hybrid system where investor will face a kind of “approval based” system, but probably not so strict.
MORE ON THIS TOPIC