China's experimental trade good points its 200th IPO slightly over a yr after launch

A woman at the securities trading post in Shenyang, Liaoning Province of China.

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BEIJING – China's stock exchange experiment is gaining in importance and attracting foreign investors.

On Monday, Newtouch Software was the 200th company to be listed on the Shanghai Star Market. This brings the total amount that companies are raising on the new board of directors to more than 287.6 billion yuan ($ 44 billion), according to official figures.

The Star Market was launched a little over a year ago to improve the ability of innovative companies to gain access to public market finance. New rules allow some companies to make a list before they make a profit. Companies can also go public via registration instead of waiting for regulatory approval.

"Our numbers show that after the registration system, the average time to IPO for star market companies is already close to that of mature overseas capital markets," said Bruce Pang. According to a CNBC translation, the head of macro and strategic research at China Renaissance said in a Chinese statement.

For comparison: According to the Wind Information Database, just over 100 companies have gone public on the Shanghai Stock Exchange since the Star Market opened in July 2019.

Foreign investors are buying

Foreign investors are paying more attention to the Star Market, which they can access through the channel for qualified foreign institutional investors. The Nasdaq board includes companies like coronavirus vaccine developer CanSino Biologics and China's largest chip maker, SMIC.

Foreign investment in the Star Market rose from 270 million yuan at the end of 2019 to 5.64 billion yuan at the end of November, according to Pang. The number represents 0.17% of the stock's total market capitalization.

The Chinese authorities have tried to improve foreigners' ability to invest in the local stock markets – the second largest in the world. However, foreigners have been cautious due to high volatility, concerns about their ability to withdraw capital and regulatory uncertainty.

The Star Market could have reached the milestone of 200 companies earlier and raised much higher capital if the authorities had not suspended the IPO of the Alibaba subsidiary Ant Group a few days before the planned listing in November.

Regardless of this, companies and investors continue to strive to tap China's capital markets. According to a CNBC analysis of an Ernst & Young report, IPOs on the Shanghai, Shenzhen and Hong Kong stock exchanges accounted for 45% of global IPOs in the first three quarters of the year.

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