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Economy

Economic Watch: One year on, China's STAR market kindles growth

July 23, 2020


Abstract : China's top home-grown chipmaker Semiconductor Manufacturing International Corporation (SMIC) made its debut on the country's Nasdaq-style sci-tech innovation board, known as STAR Market last week, and its Chairman Zhou Zixue was thrilled to ring the opening bell in the Shanghai Stock Exchange.

BEIJING, July 22 (Xinhua) -- China's top home-grown chipmaker Semiconductor Manufacturing International Corporation (SMIC) made its debut on the country's Nasdaq-style sci-tech innovation board, known as STAR Market last week, and its Chairman Zhou Zixue was thrilled to ring the opening bell in the Shanghai Stock Exchange (SSE).

The company raised a total of 53.2 billion yuan (about 7.63 billion U.S. dollars), making the initial public offering (IPO) the Chinese mainland's biggest in a decade.

"The debut on the board fully reflects the inclusiveness of the domestic capital market for sci-tech innovation enterprises, and the support of the STAR market for core technologies in key fields as well as the development of the real economy," said Zhou.

SMIC is just one of many enterprises absorbing fresh air from the STAR market, which started trading on July 22 last year, kicking off a trail-blazing leg of the country's innovation drive and capital market reform.

As of Tuesday, the STAR market has raised over 217 billion yuan for 133 listed enterprises, with a total market value of more than 2.62 trillion yuan.

The STAR-listed companies mainly have businesses in the new generation of the information technology industry, high-end equipment manufacturing, and the biopharmaceutical industry, according to the financial information provider Wind Info.

The companies on the STAR board showed a firm commitment to promoting innovation, with the average investment in research and development (R&D) accounting for 13 percent of their revenues in the past three years.

Big investments in R&D paid off on the business side. Despite the impact of the COVID-19 epidemic, some 100 enterprises on the board saw their total net profit reach over 2.8 billion yuan in the first quarter of this year, a year-on-year increase of 14 percent.

To better bolster the STAR companies, China has introduced a slew of measures specifically designed to give wings to the STAR market, by allowing some companies of a certain size to list before they have turned a profit, and letting new board stocks rise or fall by up to 20 percent a day, compared with a 10 percent cap on the main board.

Particularly, it has piloted the registration-based IPO system since its launch, easing the listing criteria for innovation-oriented enterprises while adopting higher requirements for information disclosure.

The successful operation of the STAR market provides a reference for ChiNext (China's other NASDAQ-style board for growth enterprises in the Shenzhen Stock Exchange) on implementing the registration-based IPO system, said Zhang Liqing, director of the Center for International Finance Studies with the Central University of Finance and Economics.

Marking the board's anniversary, the benchmark Shanghai Composite Index will include stocks listed on the STAR market to increase the weighting of emerging technology industries. The first index of the STAR board will become available on July 23 to timely reflect the stock performance on the board.

From a long-term perspective, the optimization is intended to restore the authenticity of the index, instead of aiming at its growth, said Dong Dengxin, a researcher with Wuhan University of Science and Technology.

The stride in the reform of the STAR market paints a rosy picture of innovation-powered growth and attracts a lot of investors and tech companies. Ant Group, the parent company of China's leading mobile-payment business Alipay, announced on Monday that it has commenced the process of concurrent initial public offerings in Shanghai and Hong Kong.

"The innovative measures implemented by the SSE STAR market and the Stock Exchange of Hong Kong have opened the doors for global investors to access leading-edge technology companies from the most dynamic economies in the world, and for those companies to have greater access to the capital markets," said Eric Jing, Executive Chairman of Ant Group.

The SSE also rolled out a statement saying that Ant Group's IPO demonstrates the attractiveness and global competitiveness of the STAR board, and shows it is the "first choice" for innovative companies in China, hoping to get listed.

Completing a productive year, the sci-tech innovation board is expected to bring a bigger platform and more inspiration for innovation to enterprises, while bolstering the productivity of technological innovation, said the SSE.

China will introduce a series of innovative mechanisms including making stocks on the STAR board tradable under the Shanghai-Hong Kong Stock Connect program, introducing the market-maker system, and facilitating the transfer of old stocks during IPOs, said Yi Huiman, chairman of the China Securities Regulatory Commission. Enditem

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Keyword: SMIC stock market STAR market

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