Sci-tech board starts new era for investors

The introduction of the Shanghai-Hong Kong Stock Connect in 2014 and the Shenzhen-Hong Kong Stock Connect in 2016 may be the most important events for A-share market opening-up in recent years, as they democratized access to A shares, said Michael Orzano, senior director of global equity indices at S&P Dow Jones Indices.

"The growth of China's onshore equity market has been tremendous over the past few decades. The opening-up of the market to foreign investors has been marked by a gradual, but consistent process, which has increased in pace significantly in recent years," Orzano said.

Despite all the progress, the A-share market "has historically been quite volatile", Orzano added.

Also, market resilience should be further strengthened, Wang said."Compared with mature overseas markets, it is harder for the A-share market to bounce back after being hit by major blows, leading to the phenomenon of short bullish runs but long bearish ones."

On the brink of its 30s, the A-share market is striding into a new development stage in which stepped-up reform measures - represented by the launch of the STAR Market - are going to redress its deeply rooted problems and strengthen its function in serving the real economy and boosting innovation, according to Wang.

Stock market reforms have assumed greater importance than ever as China's economy is heading for growth driven by technological innovation, which relies heavily on equity financing, analysts said.

President Xi Jinping announced in November that China would launch the STAR Market and pilot the registration-based IPO system. During a high-profile meeting in February, Xi stressed the need to establish a standard, transparent, open, dynamic and resilient capital market.

The China Securities Regulatory Commission, the country's top securities regulator, announced 12 main tasks for comprehensively deepening capital market reforms on Sept 10, signaling that substantive reform progress and detailed reform rules are on the way.

The commission will stick to market-oriented and law-based reforms and prioritize giving full play to the STAR Market's role as a test field. Institutional arrangements that proved effective on the new tech board, including the registration-based IPO system, will be gradually adopted across more mainland stock markets.

Also among the dozen tasks are improving the quality of listed firms and capability of investment banks, encouraging more medium and long-term capital to invest in mainland equities, strengthening the capital market legal system, and speeding up the implementation of opening-up measures.

Replicating the market-oriented reforms of the STAR Market on other boards will help stock prices to better reflect the true value of listed firms and enhance market vitality, while further opening-up could lead to "positive changes in the nature of the market", said Lynda Zhou, equities chief investment officer in China at Fidelity International.

"In the face of external uncertainty, China's pace in capital market opening-up and innovation has not geared down," Zhou said.

She cited the launch of the Shanghai-London Stock Connect in June and the country's recent decision to remove quota limits from two schemes channeling overseas institutional investors to domestic securities - the Qualified Foreign Institutional Investor program and the renminbi-denominated RQFII.

The country's firm determination and steady execution of opening-up measures will attract more foreign institutional participation in the A-share market, changing the behavior of domestic market stakeholders, Zhou said.

For instance, regulators have gradually realized the importance of factors conducive to long-term market prosperity such as environmental, social and governance, or ESG, Zhou said. Listed firms will also pay more attention to protecting the interests of small and medium-sized shareholders, she added.