Date
21 November 2018
Shanghai Stock Exchange says it will encourage small investors to invest in the firms listed on the planned new technology innovation board, via mutual funds. Photo: Bloomberg
Shanghai Stock Exchange says it will encourage small investors to invest in the firms listed on the planned new technology innovation board, via mutual funds. Photo: Bloomberg

Shanghai bourse to launch new tech board

Chinese President Xi Jinping unveiled plans on Monday to launch a technology board in Shanghai that will adopt a loosely-regulated mechanism for initial public offerings (IPOs), potentially competing with Hong Kong, or even New York, Reuters reports.

Xi announced the decision on the “technology innovation board”, to be established by the Shanghai Stock Exchange, at the start of the China International Import Expo in Shanghai, the report said.

The Chinese leader gave few details, only saying the new board will adopt a registration-based IPO system. Under the current system, all mainland IPOs must be vetted by regulators.

The announcement comes as Beijing is stepping up support toward the private sector, and encouraging innovation, to mitigate the impact of the Sino-US trade war.

Suggesting a lower listing threshold, the Shanghai Stock Exchange said in a statement on Monday that the new board will make “more appropriate and differentiated arrangements” regarding companies’ profitability and shareholding structures, and will be more inclusive toward innovators.

“This could be China’s Nasdaq,” Yang Hai, an analyst at Kaiyaun Securities, told Reuters.

“It will pose a challenge to Hong Kong,” he said, adding that Shenzhen’s tech-heavy ChiNext board could also feel the pressure.

Chinese and Hong Kong bourses have stepped up their competition to attract tech firms seeking IPOs.

Earlier this year Hong Kong introduced rules allowing companies with dual-class shares to list in the city, while China pursued Chinese Depositary Receipts (CDRs) as a way to entice overseas-listed Chinese tech giants to list domestically.

Adopting a western-style registration-based IPO system would give market forces a dominant role in deciding when a company can sell shares publicly, removing regulatory hurdles facing many Chinese listing candidates, Reuters noted.

The Shanghai Stock Exchange said on Monday that legal hurdles for such an IPO system were removed in December 2015.

It said it will encourage small investors to invest in the technology innovation board via mutual funds, so that they can share growth of innovative companies.

– Contact us at [email protected]

RC

EJI Weekly Newsletter

Please click here to unsubscribe