New market star is launched
China inaugurated its new sci-tech board on Thursday, and expected to see the first batch of companies listed on the board within two months.
The Nasdaq-style board on the Shanghai Stock Exchange, formally called the science and technology innovation board, was officially launched as the SSE STAR Market.
Yi Huiman, chairman of China Securities Regulatory Commission, announced the news at the 2019 Lujiazui Forum in Shanghai.
As a major step to implement the strategy of innovation-driven development and advance capital market reforms, the establishment of the new board bears great significance for supporting science and technology innovation, advancing supply-side structural reform and fostering sustainable and sound economic growth in China.
“The innovation board, as a newborn, has great potential and vast prospects, while can also confront various challenges,” Yi said at the launch ceremony, pledging to adhere to pushing forward marketization, legalization and internationalization in the development of the STAR board, respecting the market and implementing the reforms at every level.
Chinese Vice Premier Liu He said the two priorities for the establishment of the board are the registration-based IPO reform with information disclosure at its center, and enhancing the rule of law, raising the cost of violations and strengthening supervision and law enforcement.
“Under the registration-based system, the power of selection lies with the market,” Liu said.
“There will be transparent, strict and predictable legal and institutional conditions and the cost of violation will see a massive increase.”
Huang Hongyuan, chairman of Shanghai Stock Exchange, said the first batch of technology companies are expected to go public on the STAR Market within two months.
The delisting system for the new board will hold strict regulatory standards and high efficiency, Huang said.
Myron Scholes, Nobel laureate in economic sciences in 1997, said: “I think it very important with the idea being able to support the technology sector in China that you have a chance to have financing for these younger companies, which allows them to grow more quickly and add capital more quickly, which have a chance to innovate more and grow more.”
Yan Hong, deputy dean of the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University, said: “The launch of the STAR Market is exciting as the new board will definitely fuel economic growth in China because it will allow innovative companies in science and technology to have opportunities to raise funds directly from the capital market even if they have not really made profits but have a bright prospect in the future.”
Yan added: “This new market also represents a milestone in the capital market development in China with the implementation of the registration system which is different from the current approval system.
“Using registration system requires very strict information disclosure and also very strong punishment for violations. These allows investor to have sufficient amount of information to access and then to price according to their understanding of the information. This will return the pricing power to the market.