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Economic Watch: One year on, China’s STAR market kindles growth

Abstract : China's top home-grown chipmaker Semiconductor Manufacturing International Corporation (SMIC) made its debut on the country's Nasdaq-style sci-tech innovation board, known as STAR Market last week, and its Chairman Zhou Zixue was thrilled to ring the opening bell in the Shanghai Stock Exchange.

BEIJING, July 22 (Xinhua) — China’s top home-grown chipmaker
Semiconductor Manufacturing International Corporation (SMIC) made its
debut on the country’s Nasdaq-style sci-tech innovation board, known as
STAR Market last week, and its Chairman Zhou Zixue was thrilled to ring
the opening bell in the Shanghai Stock Exchange (SSE).

The company raised a total of 53.2 billion yuan (about 7.63 billion
U.S. dollars), making the initial public offering (IPO) the Chinese
mainland’s biggest in a decade.

“The debut on the board fully reflects the inclusiveness of the
domestic capital market for sci-tech innovation enterprises, and the
support of the STAR market for core technologies in key fields as well
as the development of the real economy,” said Zhou.

SMIC is just one of many enterprises absorbing fresh air from the
STAR market, which started trading on July 22 last year, kicking off a
trail-blazing leg of the country’s innovation drive and capital market
reform.

As of Tuesday, the STAR market has raised over 217 billion yuan for
133 listed enterprises, with a total market value of more than 2.62
trillion yuan.

The STAR-listed companies mainly have businesses in the new
generation of the information technology industry, high-end equipment
manufacturing, and the biopharmaceutical industry, according to the
financial information provider Wind Info.

The companies on the STAR board showed a firm commitment to promoting
innovation, with the average investment in research and development
(R&D) accounting for 13 percent of their revenues in the past three
years.

Big investments in R&D paid off on the business side. Despite the
impact of the COVID-19 epidemic, some 100 enterprises on the board saw
their total net profit reach over 2.8 billion yuan in the first quarter
of this year, a year-on-year increase of 14 percent.

To better bolster the STAR companies, China has introduced a slew of
measures specifically designed to give wings to the STAR market, by
allowing some companies of a certain size to list before they have
turned a profit, and letting new board stocks rise or fall by up to 20
percent a day, compared with a 10 percent cap on the main board.

Particularly, it has piloted the registration-based IPO system since
its launch, easing the listing criteria for innovation-oriented
enterprises while adopting higher requirements for information
disclosure.

The successful operation of the STAR market provides a reference for
ChiNext (China’s other NASDAQ-style board for growth enterprises in the
Shenzhen Stock Exchange) on implementing the registration-based IPO
system, said Zhang Liqing, director of the Center for International
Finance Studies with the Central University of Finance and Economics.

Marking the board’s anniversary, the benchmark Shanghai Composite
Index will include stocks listed on the STAR market to increase the
weighting of emerging technology industries. The first index of the STAR
board will become available on July 23 to timely reflect the stock
performance on the board.

From a long-term perspective, the optimization is intended to restore
the authenticity of the index, instead of aiming at its growth, said
Dong Dengxin, a researcher with Wuhan University of Science and
Technology.

The stride in the reform of the STAR market paints a rosy picture of
innovation-powered growth and attracts a lot of investors and tech
companies. Ant Group, the parent company of China’s leading
mobile-payment business Alipay, announced on Monday that it has
commenced the process of concurrent initial public offerings in Shanghai
and Hong Kong.

“The innovative measures implemented by the SSE STAR market and the
Stock Exchange of Hong Kong have opened the doors for global investors
to access leading-edge technology companies from the most dynamic
economies in the world, and for those companies to have greater access
to the capital markets,” said Eric Jing, Executive Chairman of Ant
Group.

The SSE also rolled out a statement saying that Ant Group’s IPO
demonstrates the attractiveness and global competitiveness of the STAR
board, and shows it is the “first choice” for innovative companies in
China, hoping to get listed.

Completing a productive year, the sci-tech innovation board is
expected to bring a bigger platform and more inspiration for innovation
to enterprises, while bolstering the productivity of technological
innovation, said the SSE.

China will introduce a series of innovative mechanisms including
making stocks on the STAR board tradable under the Shanghai-Hong Kong
Stock Connect program, introducing the market-maker system, and
facilitating the transfer of old stocks during IPOs, said Yi Huiman,
chairman of the China Securities Regulatory Commission. Enditem

About Xinhua Silk Road

Xinhua Silk Road (en.imsilkroad.com) is the Belt and Road Initiative (BRI) portal. China’s silk road economic belt and the 21st century maritime silk road website, include BRI Policy, BRI Trade, BRI Investment, Belt and Road weekly, Know Belt and Road, and the integrated information services for the Belt and Road Initiative (BRI).

Source: Economic Watch: One year on, China’s STAR market kindles growth

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