Following the success of the easement measures imposed on China's three-month-old technology innovation board, or otherwise known as the Star Market, regulatory officials have announced additional reforms to further expand accessibility.
Some of the main changes that will be made to the NASDAQ-styled tech board will include the removal of caps on the first day of trading, expansion of movement limits, and the acceleration of the application process for new companies who want to go public.
On Sunday, the chairman of the China Securities Regulatory Commission (CSRC), Yi Huiman, mentioned that the changes will be implemented following the success of the initial easing measures. The CSRC believes that the tech board could benefit from more lose restrictions to grant easier access to investors and tech startups. The CSRC has yet to detail when exactly it will be implementing its planned changes.
As of the moment, companies trading on China's exchanges have a 44 percent gain and loss restriction on their first day. This will then be followed by the standard 10 percent increase and decrease restriction. On the Star Market, the restrictions are much more lenient. Companies trading on the Star Market can essentially rise or fall without limits on their first week of trading. This will then be followed by a 20 percent gain or loss daily limit after the first week.
During the first weeks of trading, companies listed on the Star Market experienced massive gains of up to 400 percent. The frenzied trading eventually died down and prices eventually adjusted to more acceptable levels. The "temporary craziness" was further controlled when the daily limits were imposed after the first week.
The massive increase in the companies' valuations had caused some concerns over speculation and overvaluation. The first batch of companies that debut on the tech board is currently trading at an average of 90 percent above their IPO prices.
Analysts have stated that the CSRC's statement indicates that the regulator is likely comfortable with how the Star Market has been performing. It likely feels that the current valuations of the companies on the list are acceptable.
As part of its major reform plans, the process of applying to be listed on the Star Market will reportedly be accelerated through the use of a registration-based initial public offering (IPO) mechanism that will facilitate in the companies' fundraising. Interested companies will still need to publish information about their operations and earnings as part of their application before being approved by the Shanghai exchange.
