Trading 10 motherboard stocks shows quality development of the market. [Photo/IC]
Trading 10 motherboard stocks shows quality development of the market
The much-anticipated market-wide implementation of the registration-based IPO mechanism got off to a solid start on Monday, as the first 10 motherboard companies listed under the mechanism began trading.
Of the 10 companies that debuted Monday, five are listed on the main board of the Shanghai Stock Exchange, while the rest are traded on the Shenzhen Stock Exchange.
Data from market tracker Wind Info showed that the 10 companies’ total funding from their IPOs exceeded 21.2 billion yuan ($3.1 billion).
The introduction of the new IPO system across the A-share market is a significant milestone and is expected to facilitate the high-quality development of China’s capital market, according to experts.
Under the new mechanism, no price volatility limit will be set for the first five trading days. The 10 debutants on Monday reported an average price increase of 96.5 percent, with electronic component maker Shenzhen CECport Technologies reporting the biggest daily price increase of 221.55 percent.
The benchmark Shanghai Composite Index and Shenzhen Component Index fell 0.37 percent and 0.8 percent respectively on Monday.
During the listing ceremony, held simultaneously in Beijing, Shanghai and Shenzhen in Guangdong province on Monday, Yi Huiman, chairman of the China Securities Regulatory Commission, the country’s top securities regulator, said the IPO’s registration-based mechanism, which underscores information disclosure , has proven itself in the market and enabled advances in trading and delisting.
The mechanism has already helped the capital market better serve the real economy and encouraged technological innovation. The structure and ecosystem of China’s capital market have therefore undergone profound changes, which have greatly improved the market’s vitality and resilience, he said.
The registration-based IPO mechanism was first launched on the STAR market of the Shanghai Stock Exchange in July 2019. This step is intended to promote “hard technology” companies specializing in biomedicine, artificial intelligence or chip manufacturing.
In August 2020, the mechanism was launched on ChiNext in Shenzhen, where a variety of companies combining traditional industries with cutting-edge technologies and business models are traded.
Next, in November 2021, the Beijing Stock Exchange, established to promote technologically advanced small and medium-sized enterprises, implemented the mechanism from the start.
Under the registration-based IPO mechanism, viability requirements are relaxed for companies seeking a listing. Companies with dual class ownership may be listed.
The 10 companies that debuted on Monday had combined sales of over 193.5 billion yuan in 2022, up nearly 10 percent year on year, while their total net income rose 81 percent year-on-year to 6.6 billion yuan.
The compound annual growth rate of sales revenue for the 10 companies over the past three years (2020-22) was more than 27 percent, while that of net income was nearly 51 percent, according to Wind Info.
The 10 companies are mainly from industries such as engineering, retail, basic chemicals, construction, electronics, medicine and energy.
Chen Li, chief economist at Chuancai Securities, said the 10 companies are industry leaders with positive growth prospects. This is in line with the characteristics of the A-share motherboard, which is mainly home to large-cap blue-chip companies, he said.
Analysts from China International Capital Corp Ltd said that the market-wide implementation of the registration-based IPO mechanism will further facilitate the high-quality development of China’s capital market.
Since the mechanism is based on disclosure of information, market forces will exercise more decisive power from now on. With the normalized delisting mechanism, underperforming companies would be sorted out in due course and the environment of the entire capital market would be optimized overall, it said.
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