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At a Glance: How the Star Market Outperformed Global Peers in Q1 2020
COVID-19 and China
Image credit: Steven Lelham/Unsplash

This article is a part of EqualOcean's 'The Star Market Overview 1Q 2020' report.

With the coronavirus disease spreading globally, the first quarter of 2020 was hell for many businesses. Traditionally oversensitive to events of such magnitude, public equity markets shrank in a wink. There was an exception.

China’s mainland, where this all started, after a series of stern measures that accelerated recovery from the epidemic, found its stocks in a shape better than those of every major bourse on the planet. The country all of a sudden became a haven of calm for international investors, some of which then launched full-fledged ‘hedge in China’ strategies.

Another noteworthy observation is that tech stocks overall lost less this time – the trend is planetwide. This happened mainly because of the nature of the current crisis. Transportation, energy, retail and a couple of other industries took a hit. Meanwhile, the 5-trillion-dollar Information and Communications Technology (ICT) sector, a downstream area for most of the world’s tech companies, wasn’t that crippled and is even facing some new opportunities in the rapidly expanding digital universe.

These are the two macro forces that were a boon to the decent results China’s innovative companies with domestic listings have shown. 

Among all the Middle Kingdom’s trading platforms, of particular interest is the country’s latest answer to Nasdaq – the Shanghai exchange’s Star Market. Along with ChiNext board, its Shenzhen counterpart, the venue felt quite well in the first three months of 2020. In essence, the total market cap of companies listed therein last year grew by more than 4% in January-March, reaching CNY 908 billion (around USD 128 billion) at the end of this period.

What’s more, the newly designed IPO machine has been working desperately: two dozen fresh listings have added extra CNY 257 billion (nearly USD 36 billion), increasing the scale of the experimental marketplace. In terms of free float volume, the Star board finished 2019 with just 0.44% of the entire A-share monolith. On March 31, 2020, the proportion hit 0.85%.

The most essential steps of China’s carefully (though, as many argue, hurriedly) tailored financial sector opening-up campaign are taking place this year. Starting from April 1, foreign entities are allowed to register wholly-owned security brokerages and funds in the mainland. This, in league with the aforementioned factors, might possibly attract more foreign capital to fuel the cooling-down economy.

Although it is hard to find absolute winners of the pandemic, one thing seems obvious: nowadays, fortune tends to favor the brave, not fools – fools will suffer.

ANALYST
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