China's 'Star Market': A New Engine for the Budding Tech Sector
An analysis of Shanghai's new trading venue, where game-changing technology and public equity come together.
While China is maneuvering its way into the era of digital globalization and omnipresent connectivity, fundamental economic problems, which have been hidden behind the country’s sound growth over the past quarter century, are making themselves felt. Triggered by the recent geopolitical instability and other short-term issues – such as private companies’ exit overhang – the new financial market reform is an attempt to upgrade the public equity infrastructure, creating proper money-raising channels for countless China’s tech companies.
The Star Market is the country’s second Nasdaq-like board and the first of its kind to be built on the bedrock of the multitrillion-dollar-heavy Shanghai bourse. With its unique traits and regulations much resembling leading global stock exchanges, the new marketplace is considered a major step in the great economic transition strategy. Designed to buttress technology-driven businesses and foster homegrown innovation, it is a pilot project for the entire local financial market.
In this report, EqualOcean zooms in on the new venue, explaining the reasons behind its creation and tracking the board’s development history. The macro background that impelled China to cultivate its stock market system is depicted in the first part of this work. In the second chapter, we analyze the inner mechanism of the Star Market and determine its place in the local public equity ecosystem. Particular attention is paid to the companies that have filed for an IPO on the fresh platform. In the third section (‘Who’s been lured?’) we concentrate on the applicants’ performances and other characteristics.
Among other findings, a distinctive nature of the Star Market and its special role in the comprehensive economic reform is proven. The tech board’s structure and rules correspond with existing needs in the financial sphere. However, much like the bulk of the Chinese economy, it also contains a handful of imbalances. Numerous challenges, not only coming from China’s macroeconomic imperfections but also being brought by the board’s recent applicants, are clustered together. Hence, the future success of the project almost completely rides on the degree of flexibility that the country‘s lawmakers, market supervisory bodies and the bourses can attain.
About the research
To complete this study, we have analyzed data from various sources, including official papers issued by the market regulators, company prospectuses, financial statements and other documents related to their businesses. We have also conducted interviews with industry experts, institutional and private investors and asset managers, executives of the to-be-listed firms and the regulator’s officials.
EqualOcean has been following the sci-tech board since its inception and has collected and systematized a significant amount of information as well as a plethora of deep insights on the Star Market and its applicants. This is the first report showing the current results of our research; it will be followed by the quarterly review later this year.
We are eager to receive any valuable feedback from market actors willing to contribute to our research. Advisory services, joint projects and other forms of cooperation can also be considered. To learn more, please contact us via channels described in the ‘Key contacts’ section of the report.