IPOs, better ecosystem cheer capital markets

Brighter days are ahead for the Chinese capital market, experts said on Thursday as the nation celebrated the 100th anniversary of the founding of the Communist Party of China, which is credited with pioneering opening-up that has transformed the country's financial services industry.

The capital market has already seen sustained growth this year in terms of scale and value, coasting on the robust economic recovery in the first six months, they said.

Now, with the overall modern financial ecosystem, complete with state-of-the-art technological architecture, solidifying rapidly, more progress can be expected in the capital market, they said.

Data from market tracker Wind Info showed that 839 mutual fund products were launched in the first half, raising 1.61 trillion yuan ($249.3 billion) in all, an all-time high. Equity funds have stoked market heat, raising over 1.3 trillion yuan from various financial products issued in the past six months.

Both the number and value of newly issued exchange traded funds, or ETFs, set records in the first half. Wind data showed 140 ETFs were issued as of June 30, 1.5 times the number during the same period last year. The ETFs raised more than 102 billion yuan, up 77.44 percent year-on-year.

Technology-focused ETFs led the rise. Among the 30 ETFs that raised 1 billion yuan each, 18 have been tracking technology-related sub-indexes, according to Wind.

Meanwhile, IPOs also have been active in the A-share market in the first half, thanks to China's stable economic recovery and implementation of the registration-based IPO mechanism, said experts from KPMG, a professional services provider.

In all, 248 companies listed in the A-share market in the first six months, up 110 percent year-on-year, and raised 212.7 billion yuan, up 53 percent year-on-year, KPMG said.

The IPO surge confirmed the importance of the Nasdaq-like STAR Market of the Shanghai bourse and the ChiNext of the Shenzhen Stock Exchange. Around 175 companies went public on the two technology-heavy boards over the past six months, raising 125.3 billion yuan. Of the 10 largest IPOs in the first half, six were on the STAR Market or the ChiNext.

Industrial-scale manufacturers, technology, media and telecom－TMT－companies, and consumption firms were among those that raised the biggest amounts from their IPOs.

KPMG analysts said brisk progress of digital economy and high-end manufacturing will encourage more TMT and industrial firms to consider listing in China.

Louis Lau, partner of the capital markets advisory group at KPMG China, said: "Revised regulations aim to enhance overall market quality, in order to better serve high-quality economic development. This presents plenty of opportunities for qualified issuers as we are still in the middle of a boom in IPOs.

"In addition, the dual-circulation development pattern places the domestic market as the mainstay for China's future growth. So, significant potential exists for domestic markets and local innovative growth enterprises to fuel China's economy."

With the new delisting rules taking effect on Thursday, A-share companies with market capitalization lower than 300 million yuan for 20 consecutive trading days will be forced out of the market.

Therefore, companies with long-term potential and strong market competitiveness will be more favored by investors, said Zhou Maohua, an analyst with China Everbright Bank.

A Guotai Junan Securities research note said the A-share market will further mature with institutional investors playing a bigger role amid a sense of a level playing field created by market-friendly regulators.

Chen Guo, chief strategist of Essence Securities, said China's economic upgrading and the rise of high-quality companies will buoy the peak performance of the A-share market in the long term.