The Shanghai Stock Exchange has given the green light for the first company to start book building ahead of its listing on the eagerly-awaited technology innovation board.
It is likely to trigger a buying frenzy among investors keen to back promising young firms due to list on the new STAR Market, analysts said.
Suzhou HYC Technology, a manufacturer of display and touch testing equipment, said on Wednesday morning that it would begin price consultation with institutions for its initial public offering (IPO), which is expected to raise 1 billion yuan (US$144.9 million).
Following the price consultation, subscription for the new shares will start on June 27, HYC said in an exchange filing.
“Billions of yuan will be tied up to the company’s IPO since investors perceive those technology stocks as the country’s profit stars of the future,” said Zhou Ling, a hedge fund manager with Shanghai Shiva Investment. “Other companies due to list on the new board will also be heavily oversubscribed.”
China officially launched the STAR Market, a pet project of President Xi Jinping’s designed to support technological innovations, on Thursday last week.
Trading on the Nasdaq-style board will start within two months, Huang Hongyuan, chairman of the Shanghai Stock Exchange, said at that time.
To date, 11 companies have passed through the new exchange’s IPO review process.
Brokers predict that more than 20 firms will be listed on the new board when trading debuts.
Another 14 companies will go through the IPO review process in the coming week.
Xi announced plans to set up the board in November, and the securities regulators have been stepping up efforts to complete the preparations as quickly as possible.
As the US-China trade war stretches to the technology sector, Beijing is keen to get the fundraising platform up and running to support domestic technology start-ups, in the hopes of creating China’s own behemoths like Microsoft and Apple.
In the fields of chip making, biotechnology, and computer software, Chinese companies are facing the prospect of being strangled by the US administration as it accuses China of stealing its intellectual property.
The new market has adopted a registration-based IPO system to facilitate companies’ fundraising.
Under the new system, the regulators are responsible for assessing the truthfulness of the documents about the companies’ earnings and operations before granting them approval.
The regulators will let the market decide the worth of the IPOs.
Under the existing IPO mechanism, the regulators focus on applicants’ earnings potential and have a final say on IPO pricing.
The launch of the STAR Market comes as Beijing is seeking to internationalise its capital markets to match the country’s economic might worldwide.
On Monday, China and Britain launched the Shanghai-London Stock Connect scheme, enabling foreign companies to list their shares in mainland China for the first time.
British companies can issue Chinese depositary receipts (CDR) – bank certificates representing shares – to raise yuan funds on the Shanghai exchange.
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