STAR market expected to nurture leading global tech firms

SHANGHAI -- China's Nasdaq-style sci-tech innovation board, also known as the STAR market, is expected to nurture world-class technology companies in China, considering its astonishing growth in the past year.

The STAR market marked its first anniversary on Wednesday, having been inaugurated on July 22 last year. So far, the STAR market has raised about 217.9 billion yuan (about $31 billion) for 140 listed enterprises. Several leading tech firms, such as SMIC and National Silicon Industry Group, have a market value of about 100 billion yuan.

SMIC, China's leading semiconductor manufacturer, was listed on the market on July 16. It obtained approval for its IPO from Chinese regulators in 19 days and entered the board in just 46 days, reflecting the fast-track approach and constant innovations of the board's listing system.

On April 30, China's top securities regulator adjusted the threshold for innovative red-chip companies, allowing overseas-listed innovative red chips to apply for domestic listing if they have a capitalization of 20 billion yuan or above and are in possession of self-developed and world-leading technologies as well as innovative strengths.

Gao Yonggang, chief financial officer of SMIC, said that, thanks to the policy adjustments, SMIC can return to the A-share market.

"We had not met the requirements of the previous threshold, which required capitalization of 200 billion yuan for red-chip companies. The government timely revised the threshold for foreign-listed companies to return to A shares, which paved the way for SMIC to make its debut on the STAR market," said Gao.

According to Mandy Zhu, head of China global banking of UBS, the multiple listing criteria of the STAR market are more flexible and provide diversified paths for loss-making companies and companies with dual-class share structures to enter the market.

Qi An Xin Technology Group Inc, a Chinese network-security service firm listed on the STAR market on Wednesday, is one of the beneficiaries.

"The STAR market has changed the listing criteria from sustainable profitability to sustainable operating ability, which allows companies with core technologies and a long cash-conversion cycle like us to successfully go public and further expand with the strength of the capital market," said Qi Xiangdong, chairman and CEO of Qi An Xin.

More and more enterprises see a promising future in the STAR market and are choosing dual listing in Shanghai and Hong Kong. Chinese automaker Geely Automobile Holdings Limited, which has already been listed in Hong Kong, recently announced its return to A shares and started pre-listing tutoring.

Chinese fintech firm Ant Group, a leading provider of financial services technology, announced Monday that it would list its shares on both the STAR market and the Stock Exchange of Hong Kong.

"The STAR market and the Stock Exchange of Hong Kong have launched a series of reforms and innovations to create favorable conditions for companies of the new economy to better access the support from the capital market, including international capital," said Eric Jing, executive chairman of Ant Group.

The return of more red-chip companies also creates opportunities for foreign securities firms.

UBS Securities is the only foreign-controlled securities firm to participate in the issuing of the STAR market. Morgan Stanley Huaxin Securities has participated in four STAR market projects.

Zhou Haichen, director of SWS Research, said that the STAR market will become more mature. "Its positioning will continue to optimize with China's economic transformation, and the inclusiveness will be further improved," said Zhou.

Marking the board's anniversary, the benchmark Shanghai Composite Index started to include stocks listed on the STAR market to increase the weighting of emerging technology industries. The first index of the STAR board was released on Thursday.

"The STAR market is expected to form a virtuous circle among exchanges, issuers and investors in the future, giving birth to China's world-class tech companies and realizing the goal of returning the capital to the real economy," said Zhu.