How the Star Market Pushes China’s IPO Pendulum (Briefly)
The tech board saw over CNY 81 billion raised in 70 public offerings last year.
This article is a part of EqualOcean's 'The Star Market Overview 1Q 2020' report.
Since the Shanghai Stock Exchange (SSE) Sci-Tech Innovation Board, dubbed the Star Market, kicked off trading on July 22, 2019, EqualOcean has been closely following its development. In September, we published a report wherein the most significant novelties regarding the listing and trading mechanisms were explained; our team then proceeded with the first quarterly overview of the nascent marketplace.
Here below is a glance at the new venue’s impact on the mainland’s IPO activity, one of the essential indicators of the public equity market performance.
For a long time, the country’s two major economic clusters – the Pearl River Delta and the Yangtze Delta – have been competing across various areas. The financial sector has always been among the principal elements of this conflict. In 2009, after ten years of market anticipation, the Shenzhen Stock Exchange (SZSE) launched the Nasdaq-like submarket ChiNext, which has grown into a vital component of China’s capital market. With over 800 active listings, it is currently worth nearly CNY 200 billion (USD 28 billion), as per CEIC data.
Nevertheless, Shanghai, a habitué of multiple city-comparing ‘top’ lists (for one, arguably the most famous among those – GFCI), saw some large-cap public offerings in the second decade of this century. This kept the modern city above its southern counterpart in terms of money obtained by the companies on their IPO days between 2015 and 2018.
Last year, the pendulum swung toward the SSE significantly: it was responsible for almost three out of every four yuan taken home in A-share listings. And the Star Market contributed the most to this success. Seventy of the country’s technology companies went public there in just a bit more than five months of the board’s operation. They bagged more than CNY 81 billion (over USD 11 billion) and had reached a combined market cap in excess of CNY 873 billion (USD 123 billion) by the end of that year.
Despite the COVID-19 pandemic and the ensuing global economic and stock market turbulence, there were two dozen fresh Star board listings in the first quarter of 2020. It also received a bunch of new applications from firms that are expected to finish the procedures and elbow their way out of the IPO pipeline in a few weeks. As the local private equity market is getting harsher, with investors hedging against so-called black swans, China’s technology-driven enterprises are hungry for capital. We project the number of stocks trading on the Shanghai sci-tech platform to surpass 200 by the year’s end.
The SSE Star Market has received 223 ‘dossiers’ as of April 2, 2020.