Mon, Jul 22, 2019 - Page 16 News List

China approves 25 technology firms for STAR Market


Trading was to begin today on a Chinese stock market for high-tech companies that play a key role in official development plans that are straining relations with Washington.

Regulators have approved 25 firms in information technology and other fields seen by leaders of the Chinese Communist Party (CCP) as a path to prosperity and global influence for the Shanghai Stock Exchange’s STAR Market.

The market, modeled on the US-based NASDAQ, reflects the CCP’s desire to channel private capital into its development plans. It gives small Chinese investors a chance to buy into tech industries that until now have turned to Wall Street to sell shares.

“The new board’s important role is to provide a fundraising channel for China’s scientific and technological innovation,” Industrial Bank Co (興業銀行) economist Lu Zhengwei (魯政委) said in Shanghai.

The STAR Market has more lenient standards for profitability and price volatility than the main exchanges in Shanghai and Shenzhen.

Companies that have yet to make a profit can trade on the Shanghai tech board if they spend at least 15 percent of revenue on research and development, or have drugs or other technologies in advanced development. By contrast, the main board requires at least two years of profits before a company can join, a condition that has limited access for fledgling ventures.

Allowing companies to sell shares before they are profitable will encourage development of Chinese venture capital by allowing early investors to recover some of their money, Lu said.

Shares on the new market can swing by 30 percent in price before regulators will impose a 10-minute trading halt. The main exchanges halt trading for the day of any stock that rises or falls 10 percent.

In addition to companies due to start trading today, the Shanghai exchange said it was reviewing applications from 116 other ventures for initial public share offerings.

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