China plans new tech bourse in Shanghai

Nov 06, 2018
News comes same week Shanghai Exchange announces end to verbal guidance

China's President Xi Jinping has revealed plans for a new, tech-focused trading venue in Shanghai, in what appears to be a bid to keep key tech firms from going public in Hong Kong or the US. 

The Shanghai Stock Exchange will also start a pilot program for a registration-based system of IPOs – widely used across developed markets – Xi said at the opening ceremony of the China International Import Expo on Monday, though he did not elaborate on either initiative.

Following Xi’s speech, the China Securities Regulatory Commission (CSRC) issued a statement noting that companies seeking to list on the new tech-focused trading venue will be subject to different profitability and ownership requirements compared with the existing stock exchanges.

In April, the Hong Kong Stock Exchange (HKEX), still smarting from the loss of the Alibaba IPO to the NYSE in 2014, changed its rules to allow dual-class shares – also with a view to attract more tech listings. Another rule change instigated at the time sees HKEX now allow biotech firms without either profit or revenue to go public, with Ascletis Pharma becoming the first biotechnology firm to do so under the new rules. The Chinese maker of HIV, cancer and liver disease drugs closed unchanged from its offer price on the first day of trading in August. 

In other news, the Shanghai Stock Exchange revealed on Friday that it had ended the practice of providing verbal feedback, according to media reports citing a statement in Chinese.

The Shanghai Stock Exchange says it will no longer use the practice, known as window guidance and unpopular with foreign investors, to ‘reduce trading obstacles and unnecessary interventions, so that the market can have a clear view of what to expect from regulators’. That statement came days after the CSRC issued a statement saying it would reduce ‘unnecessary intervention’ in the markets. 

Both announcements have largely been seen as a response to the volatility seen in Chinese markets, most notably between mid-2015 and early 2016 when the effects of panic selling in China were felt across global markets.

 

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