Opinion | Star Market and IPO reforms to enhance investment appeal
Innovation and investment go hand in hand. China’s hi-tech drive to achieve self-sufficiency needs a dynamic domestic market to help raise capital efficiently. This is especially so at a time when new tech and financial curbs are constantly being imposed by the United States. It makes sense that Beijing now has its eye on reforming Shanghai’s Nasdaq-style Star Market.
The new measures aim to enhance the investment appeal and listing quality of stocks on the market.
The announcement from the China Securities Regulatory Commission (CSRC) is the clearest indication yet Beijing is renewing support to knock that segment of the capital market into shape and to help new tech firms to raise capital onshore.
Launched in 2019, the Star Market has been operating in the shadow of the Shanghai exchange’s main board. But it is the natural home for China’s new tech-driven firms, and key to the country’s whole hi-tech ecosystem. As CSRC chairman Wu Qing told the Lujiazui financial forum this month, the focus will be on “earlier and better investment in core technologies to promote the virtuous financial cycle of the tech industry”.
The new measures will revamp the pricing mechanism for IPOs, encourage more mergers and acquisitions to optimise fundraising, and offer more exchange-traded funds and derivative products such as index futures and options. The announcement, though, barely moved the market. It came as the rebound in mainland stocks flagged, with renewed market concerns about China’s economic recovery, from industrial production to home prices in the property market. Retail sales, though, have picked up.
The Star reform is welcome, but may take the market longer to digest. Interestingly, Wu’s deputy and CSRC vice-chairman Fang Xinghai caused more of a stir at the same forum when he said officials were expediting approvals for offshore initial public offerings (IPOs).
Investors in Hong Kong interpreted that as meaning more stock-listing business for the city. Having been at the top of the global IPO business, its record in recent years has been lacklustre. Many are hoping to see a revival with a new wave of potential local listings.
The successful IPO of Tencent-backed QuantumPharm earlier this month has greatly boosted local market sentiment.
Some 158 mainland companies have obtained approvals for overseas listings. Of these, 85 are heading for Hong Kong and 73 for the United States. Fundraising in Hong Kong dropped by 35 per cent year on year to HK$11.6 billion in the first half, but the momentum has picked up in recent months. Beijing has its work cut out to achieve what it calls the “high-quality” development of the country’s capital markets – for tech and beyond.
