EqualOcean – Star Market Overview, July 2019
Key insights on the Shanghai Stock Exchange sci-tech board's first steps.
Read more about the new venue in the latest EqualOcean report.
China's Nasdaq-style marketplace kickstarted trading on July 22.
A combined market cap of the board's 25 stocks surged by over 120% in the first week of trading.
So far, the industrial sector prevails on the Star board, represented by 12 companies.
While the second week of trading on the Shanghai Stock Exchange (SSE) Sci-Tech Innovation Board, known as the Star Market, is going by, it is time to take stock of the new venue's background and sum up some interim results.
EqualOcean has been following the Star board since its inception. We have prepared over 50 articles touching upon both the marketplace itself and the companies that filed prospectuses to go public therein. This article summarizes our current efforts to spread knowledge about China's latest attempt to connect domestic tech firms with local financial markets.
Before unleashing the monthly 'results', it is vital to go through what happened earlier. Below are several questions about the fresh submarket and brief, illustrated answers.
Or "what for?". This is a complicated issue. Although a huge set of factors exists, we consider three things as the most solid arguments explaining why this reform happened to China's market. They are derived from the economy's fundamental needs that got especially acute lately.
1) A more mature, sustainable capital market is needed to smoothen the economic slowdown as well as the currently hot structural reform. A disbalance of some sort can be seen from the stock market industry-level distribution.
2) An internationally competitive trading platform might lure back home numerous Chinese companies that once went public abroad; it can also prevent further possible 'leakages' of this type.
3) Nowadays, economic growth is spurred mostly by innovation that is usually born from the tech-money cross-breeding. China has been having a hard time ameliorating market-based financing channels, and the new board might turn out to be a new chance.
The Star Market is a top-down initiative, proposed by the national leaders. Xi Jinping, President of China, announced the project during the 1st China International Import Expo in November 2018.
In late March 2019, companies started submitting applications; after seven months of development, the board was officially launched on June 13.
The new marketplace began facilitating open-market operations on July 22, with the first batch of 25 stocks that had previously undertaken a lottery-based share allocation procedure.
Rules of the game are the most vital thing to discuss while comparing various bourses of China's mainland. As for the Star Market, it is less strict for companies; one example is that this is the first mainland China board allowing loss-making firms to go public. At the same time, the regulators became harsher to the demand-side players -- they made the requirements for traders somewhat tougher this time.
So far, 148 companies have filed prospectuses with the Shanghai Stock Exchange as of July 2019. As mentioned above, 25 of them launched open trading this month. These companies compile an illustrative list.
Noteworthy is that so-called 'Internet companies' could not be found on the list yet. Enterprises that market tangible goods apparently prevail. Five electrical equipment producers constitute the biggest industry-level cluster among the stocks in the new marketplace. This group is followed by the semiconductor industry (represented by four companies).
'Industrials' is the largest macro sector on the board as of July 2019. Both by the number of stocks and the combined market capitalization. For instance, CRSC -- the biggest company on the Star Market that is also listed in Hong Kong -- made CNY 34.8 billion (USD 5.1 billion) in operating income last year.
'Technology,' the second largest group in our breakdown, comprises several companies that the Chinese government openly bets on. Chipmakers stand out here as the semiconductor industry is considered the core part of the Chinese economy, which is being overhauled.
'Table of contents', July 2019
This time, we divide the results of recent EqualOcean's research into four sections.
The Star Market and its essence
The listed companies:
AMEC (中微公司) (688012:SH)
Anji (安集科技) (688018:SH)
Appotronics (光峰科技) (688007:SH)
ArcSoft (虹软科技) (688088:SH)
BLT (铂力特) (688333:SH)
CRSC (中国通号) (688009:SH)
Endovastec (心脉医疗) (688016:SH)
Espressif Systems (乐鑫科技) (688018:SH)
Fangbang (方邦股份) (688020:SH)
Fine Yuan Technology (嘉元科技) (688388:SH)
Forecam (福光股份) (688010:SH)
Hangke Technology (杭可科技) (688006:SH)
Harmontronics (瀚川智能) (688022:SH)
HYC Technology (华兴源创) (688001:SH)
Micro-Tech (南微医学) (688029:SH)
Montage Technology (澜起科技) (688008:SH)
PIESAT (航天宏图) (688066:SH)
Raytron (睿创微纳) (688002:SH)
Ronbay New Energy (容百新能源) (688005:SH)
Tianyishangjia (天宜上佳) (688033:SH)
Traffic Control Technology (交控科技) (688015:SH)
TZTEK (天准科技) (688003:SH)
Western Superconducting (西部超导) (688122:SH)
Worldia (沃尔德) (688028:SH)
Xinguang (新光光电) (688011:SH)
The IPO pipeline
Amlogic (晶晨半导体) (688099:SH)
Bio-Thera (百奥泰) (A19381:SH)
CABIO Biotech (嘉必优) (A16213:SH)
Friendess Technology (柏楚电子) (A19030:SH)
HeJian Technology (和舰芯片) (688188:SH)