This article is a part of EqualOcean's 'The Star Market Overview 1Q 2020' report.
The COVID-19 pandemic has mutilated the global economic system, sapping demand and chopping supply chains across industries. The financial world has also been affected drastically, with the vast majority of stock market indices falling at double-digit rates.
China’s public equity sector, which, over the past few years, has been making bold steps toward world-class standards and ultimate openness, seems careless about the international emergency. On March 1, for example, the state regulators launched a countrywide “registration-based” system, simplifying the IPO application mechanism on both the Shanghai and the Shenzhen bourses. One month later, China finally opened the registration of wholly foreign-owned financial entities.
Local IPO activity has also shown a great deal of resilience. The Shanghai exchange’s new tech board – the Star Market – has emerged as the most-desired destination for the country’s countless technology startups (for one, check the recent application from chipmaking unicorn Cambricon). Real numbers have proven this statement.
Out of 51 enterprises that went public on the mainland from January to March, almost half landed on the Star Market. Combined, they raised in excess of CNY 29.44 billion (USD 4.17 billion). Among the largest listings, Roborock, a smart home appliances maker, bagged CNY 4.52 billion (USD 640 million) in February. China Resources’ semiconductor arm took home CNY 4.31 billion (USD 610 million) shortly after this event. In fact, the tech board-listed firms have not only been experiencing mind-boggling first-day share price leaps, but they also tend to obtain more financing than those getting listed elsewhere within China. The reason? Higher P/Es.
Of more interest is the fact that the new stocks were traded intensively over that period. In February, the volume of transactions related to the 24 companies listed in 2020 was nearly equal to that of 70 firms that launched trading in the previous year. While this can be partially explained by the increased investor interest in fresh assets, this trend was strong in March too.
As new listings are igniting more active trading, the bourse is continuously receiving new applications. At the same time, the local private equity market is getting harsher, with investors hedging against literally everything.
We project the number of stocks trading on the Shanghai sci-tech platform to surpass 200 by the year’s end.