context: Opened in 2019, the STAR Market (Shanghai Stock Exchange’s Science and Technology Innovation Board) aims to be the PRC’s Nasdaq and support smaller 'hard tech' firms in achieving tech self-reliance. However, high IPO thresholds hinder financing for innovation, such as in semiconductors. On 19 June 2024, CSRC (China Securities Regulatory Commission) unveiled fresh measures to lower the IPO and M&A barriers for hard tech firms.
Wu Qing 吴清 CSRC (China Securities Regulatory Commission) chair gave a speech on eight measures to reinvigorate the STAR Market (Shanghai Stock Exchange’s Science and Technology Innovation Board) on 19 June 2024 at the annual Lujiazui Forum, reports Caixin. The reform will support 'hard tech' through improvements in issuance, underwriting, M&As, equity incentives and trading systems.
Wu states the reform aims to
- nurture emerging industries and upgrade traditional ones
- cultivate ‘patient capital’ for high-volume, long-cycle tech investments
To achieve these goals, the new measures will
- allow unprofitable tech firms with key core technologies and market potential to list on the STAR Market
- increase stock allocations for offline investors with higher lock-in ratios and longer lock-in periods
Strict standards on tech attributes are likely imposed on loss-making companies during IPO or M&A applications, notes an investment professional. CSRC will also press investment institutions to improve their pricing capabilities.
On IPO rules, Wu mentions the reform will
- improve allocation arrangements
- increase STAR stocks holding volume requirements for offline investors
- regulate of price inquiries
- explore a 'white list' for professional investors
On investor protection, Wu emphasises
- risk identification, warning, exposure and handling
- strict penalties for violations
- cracking down on fraud through
- encouraging 'whistleblowers'
- holding investment banks and auditors accountable
- enhancing inter-agency coordination and central-local collaboration
- cooperating with judicial bodies
- prevent escape from accountability through delisting
On quantitative trading regulation to protect individual small investors, Wu stresses
- monitoring high-frequency trading
- cracking down on disruptive, profit-seeking behaviors by leveraging technology
Wu expresses support for Shanghai to become a world-class financial center by
- promoting the stock and bond markets
- leveraging futures and derivatives markets
- enhancing Shanghai’s pricing influence
- supporting foreign financial institutions
- cultivating top-tier investment banks and investment institutions