This undated photo shows the China Securities Regulatory Commission in Beijing, China. (PHOTO / CHINA DAILY)
BEIJING — China's securities watchdog on Wednesday published a guideline on the implementation of science and technology innovation board at the Shanghai Stock Exchange.
As per the proposed rules, China will remove limits on initial public offering pricing and first-day gains under plans for the new board aimed at avoiding losing the likes of Alibaba Group Holding Ltd and Tencent Holdings Ltd to overseas markets.
As per the proposed rules, China will remove limits on initial public offering pricing and first-day gains under plans for the new board. The proposed rules will also let unprofitable companies go public, allow dual-class voting structures and put in place stricter delisting measures, according to the CSRC and Shanghai Stock Exchange
The proposed rules will also let unprofitable companies go public, allow dual-class voting structures and put in place stricter delisting measures, according to statements from the China Securities Regulatory Commission (CSRC) and Shanghai Stock Exchange.
The move is part of President Xi Jinping’s efforts to improve the nation’s capital markets and make it easier for new-economy firms to go public. A dedicated tech market may also help Shanghai wrest IPOs from Hong Kong and New York, which are home to many of the Chinese mainland’s biggest companies, such as Tencent and Alibaba, respectively.
Other key points from the draft rules for the new exchange include removing restrictions that cap IPO pricing at 23 times earnings, abolishing price limits for the first five days of trading, followed by a 20 percent trading band. This compares with an existing 44 percent cap on how much a stock can gain on debut, followed by a prevailing 10 percent trading band.
Under the proposed rules, the new board also requires individual investors to have a minimum 500,000 yuan (US$74,500) in their securities accounts and two years experience to trade on the new exchange. Other requirements also include a two-year lockup period for sponsoring brokerages, and three years for senior management and core technology personnel.
The science and technology innovation board will focus on companies in high-tech and strategically emerging sectors such as new generation information technology, advanced equipment, new materials, new energy and biomedicine, the CSRC said.
The move also aims to push for integration of internet, big data, cloud computing, artificial intelligence and manufacturing sector, according to the statement.
The CSRC vowed to step up oversight on companies listed at the new board and crack down on illegal activities such as fraudulent issuance and false statement.
READ MORE: New board appeals to good tech firms
“This new exchange is a good supplement to the existing capital market structure, and there is the possibility that if the trial goes well, some of the measures can be expanded to other trading venues,” said Cliff Sheng, Hong Kong-based partner and co-head of financial services at Oliver Wyman.
The new venue will offer the likes of Tencent and Alibaba to spin off subsidiaries and issue shares in the Chinese mainland, said Lyndon Chao, head of equities at the Asia Securities Industry & Financial Markets Association.
The Shanghai Stock Exchange will solicit public opinion on detailed rules regarding the new board in the next 20 days.
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