The official launch of overhauled IPO system in China will take place on Monday when the first 10 registration-based IPOs begin trading at the Shanghai and Shenzhen stock exchanges.
The official launch of overhauled IPO system in China will take place on Monday when the first 10 registration-based IPOs begin trading at the Shanghai and Shenzhen stock exchanges.
It is a significant development for China’s stock market’s maturation, analysts said, significantly enhancing the role of investment and financing of the capital market and directing more capital into the nation’s technology innovation sectors.
“The groundwork has essentially been laid for the first group of registration-based IPOs companies to list on the main board in China. It is now appropriate for them to go public, “according to a statement on the Shanghai Stock Exchange’s website.
The 10 IPO companies include Zhongzhong Science & Technology (Tianjin) Co., a manufacturer of smart equipment; Shaanxi Energy Investment Co., a provider of electricity; and Zhejiang Haisen Pharmaceutical Co. Chinese media reports that they will either be listed on the Shanghai or Shenzhen bourse.
According to Wang Peng, a research fellow at the Beijing Academy of Social Sciences, “These companies are mainly leading enterprises in traditional sectors, have science and technology advantages, are able to create many jobs, and drive the development of upstream and downstream associated enterprises, reflecting the capital market’s increasing support for the real economy.”
Under the current system, the IPO process takes longer, and there are numerous uncontrollable factors that could have an impact on how businesses operate and produce their products. As a result, many businesses prefer direct financing, according to Wang.
However, he predicted that the percentage of direct financing in the capital market would increase significantly because the new registration-based IPO arrangement makes IPOs more efficient and predictable.
By strengthening support for the real economy, the registration system’s implementation also meets the demands of China’s economic transformation, according to Yang Delong, a former chief economist at First Seafront Fund Management Co. in Shenzhen, who told the media this.
Technology and innovative businesses should have more room to grow, according to Yang. According to him, as recession risks in the US and Europe are rising, the appeal of Chinese mainland stocks will only increase and draw more foreign investment.
In 2023, the A-share market is anticipated to receive between 300 and 400 billion yuan ($43.6-58.2 billion) in foreign capital, according to the Securities Daily, citing China International Capital Corp.
Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China said that, “the goal of the registration-based system is to deepen administrative supervision reform and let the market and government play decisive roles in the allocation of resources.”
Dong stated that the reform of China’s securities regulation has reached a point where policymakers are pursuing more extensive changes.
According to Dong, the authorities should strengthen regulatory oversight of publicly traded companies, strengthen the integrity assessment of intermediaries, and optimise rewards and penalties in order to achieve a more market-oriented mechanism and increase efficiency.
In order to support the nation’s high-tech independence and better support high-quality economic growth, the China Securities Regulatory Commission made a commitment during a meeting on Thursday to advance deeper reform of the registration-based IPO system, unwaveringly expand institutional opening-up, and improve the functions of the capital market.
In February 2023, China formally implemented the registration-based IPOs system. The new system was tested in the nation in 2019 on the science and technology innovation board, and it was made available to shares on the Beijing Stock Exchange in 2021 as well as the ChiNext board in 2020.