Shanghai's Stock Exchange has made changes to its listing rules and guidelines to improve the way it works and transform China's market into one similarly utilized by Nasdaq. The radical move will scrap the existing valuation limit and transform the regulatory vetting mode into a registration-based listing process.
The so-called Science and Technology Board will utilize the pilot registration system intended to up the ante of China's market system which is currently operating on a multi-level capital system. This technology innovation board is expected to launch in a matter of months, possibly weeks, since approval by the China Securities Regulatory Commission has ostensibly being met.
As early as Friday, trading and listing rules have already been published. This has got asset managers on the move to prepare funds to target Shanghai's upcoming Science and Technology board.
The move will effectively allow initial public offerings to be priced according to "interactions with eligible offline investors." The move is intended to provide an avenue for valuable companies to raise funds in the present business climate where small and private businesses are finding it hard to get banking loan approvals.
This maneuver is also seen as a way for Shanghai to compete in the financial race against other burgeoning centers of finance like Hong Kong. This is one way too of promoting the rapidly developing technology sector in the country.
This, however, is not intended as a free-for-all as there are some requirements that individuals and investors need to meet. For instance, anyone who intends to purchase stocks is required to have assets averaging daily at 500,000 yuan or $74,000 in their securities account in the last 20 days prior to application. Those who are unable to meet requirements may invest by mutual funds on the Science and Technology Board.
Song Xuetao, a Tianfeng Securities financial market analyst, gave the move a nod saying that the changes being made may hopefully pave the way for a solution to the nation's debt problem.
He goes on to say that "a strong capital market" will help make it possible for China to grow into a "real technology power."
This reform was initiated by China's Xi Jinping in November 2018 based on global economic and financial trends as well as a review of the current situation in China that demands national reforms and accessibility.
With this new market set to be in place soon, inclusion for technology startups will be possible and the move will clearly make available much needed support for innovation.
