First 10 registration-based IPOs kick off trading on China’s main boards in Shanghai, Shenzhen
Overhaul makes China aligned with capital markets in developed economies: expert
Published: Apr 10, 2023 07:20 PM

stock market Photo:VCG

stock market Photo:VCG

The first 10 registration-based IPOs on the main boards of the Shanghai Stock Exchange and Shenzhen Stock Exchange made their debuts on Monday, a landmark for China's $12.7 trillion stock market, the world's second-largest in market capitalization.

This new mechanism will support a multi-faceted, freer capital market that will better serve the real economy, and it will make China more aligned with the capital markets in the developed economies, experts said.

The 10 companies include smart equipment maker Zhongzhong Science & Technology (Tianjin) Co, electricity operator Shaanxi Energy Investment Co, Shenzhen CECport Technologies Co and Zhejiang Haisen Pharmaceutical Co. 

Shares prices of three of the 10 companies more than doubled at market close on Monday, with shares of Shenzhen CECport Technologies up more than 220 percent. 

Under the new trading rule, the 10-percent daily limit on movement of share prices during the first five trading days was removed, and the limit will come into force starting on the sixth day. 

It took about 50 days for these companies to start trading after their IPO applications. Under the previous approval-based system, the China Securities Regulatory Commission (CSRC) vets every application, and that could take months or even years.

Now, exchanges review IPO applications, and companies need only register with the CSRC.

A representative of Zhejiang Haisen Pharmaceutical Co told the Global Times on Monday that the whole process was exciting as it was very transparent, standardized and market-oriented.

"We want to do our job well in terms of information transparency and disclosure under the new registration-based system, and we'll be more motivated to expand our business in a more market-oriented environment," the representative said.

With the CSRC taking a back seat, market players are being urged to perform their duties and foster a sound market environment.

The reform is a change that touches the underlying logic of supervision, and "it is a blade-inward transformation," CSRC Chairman Yi Huiman said at an IPO ceremony on Monday.

First, it shows a change of philosophy. The new system adheres to information disclosure as its core, and the regulator will no longer judge the investment value of specific companies, Yi said. 

Second, it is a change in the "gate-keeping method" which will be mainly through the quality control of information disclosure, and the issuer will be the prime party responsible for such disclosure, he noted.

Transparency will be underscored and regulatory enforcement will be stricter, the chairman added.

The CSRC announced full implementation of the new system in February. 

Trials of the system began in 2018 on the STAR board of the Shanghai bourse, the ChiNext market of the Shenzhen bourse and the Beijing Stock Exchange. 

Chen Li, chief economist of Chuancai Securities, told the Global Times on Monday that, driven by the reform, the construction of a diversified capital market system has come into being, focusing on fairness, openness and impartiality.

"The functions of financial markets in serving the real economy will be strengthened," Chen said, and the capital market will keep pace with the times, and it will contribute more to the country's technology ascendance.

"With a full registration-based IPO mechanism in place, which is more market-oriented and more inclusive, China has become more aligned with capital markets in developed countries," Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co, told the Global Times on Monday.

"The biggest impact is that the market ecosystem has changed, and investors will pay more attention to the fundamentals of companies. Only high-quality firms will survive," Yang said.

Expanding the registration-based IPO system will help streamline the listing process and attract companies that went public in the US or China's Hong Kong Special Administrative Region in the past because they couldn't meet the requirements of the Chinese mainland, analysts at Industrial Securities wrote in a note.

China's capital market has achieved continuous progress in the past decade. In February, the number of stock market investors in China rose to more than 1.67 million, according to the China Securities Depository and Clearing Corp.