Shenzhen listings outshine Shanghai
Shanghai's ambition to become a global financial centre has hit a blip. The city's stock exchange has been eclipsed this year by its smaller domestic counterpart in Shenzhen.
The Shanghai Stock Exchange, buoyed by Beijing's directives, has consistently dominated its domestic rival - until now. So far this year, it has lagged Shenzhen in terms of the amount of funds raised as more small and medium-sized enterprises listed on the southern bourse's SME and start-up boards.
A total of 176 small initial public offerings have launched on the Shenzhen exchange so far this year, raising a combined 134.7 billion yuan (HK$164.5 billion).
That's more than double the 60 billion yuan raised in initial public offerings by 29 companies on the Shanghai bourse.
Factoring in refinancing deals, Shenzhen's 344 billion yuan in total fund-raising also outshone Shanghai's 210 billion yuan.
The figures not only represent a rare embarrassment for the Shanghai exchange, but also pose a reality check for city officials who envisioned transforming Shanghai into a global financial hub without taking the steps necessary in the past two years to earn that status.
The blueprint announced by the State Council in early 2009 envisioned building Shanghai into a financial centre, with a large and active stock market drawing top-quality foreign companies and an influx of overseas funds.
The China Securities Regulatory Commission (CSRC) decides where IPO applicants list. For the past two decades, the Shanghai exchange enjoyed an advantage over Shenzhen as the regulator distributed most large IPOs to the nation's commercial capital.
The Shenzhen bourse began to scramble for listings about 10 years ago as it focused on creating a Nasdaq-style growth market.
The efforts paid off when Beijing approved the long-delayed launch of the ChiNext market by the Shenzhen exchange in October 2009, which opened the floodgates to prospective start-ups seeking to raise capital from equity investors.
'It was like a see-saw game,' said a Shenzhen-based investment banker who asked not to be named. 'Now the Shanghai exchange feels it is marginalised.'
The CSRC is now cautious about approving large IPOs for the Shanghai exchange amid the market downturn.
The launch of an international board, on which big foreign companies would list, has also been put on hold, according to sources with knowledge of the matter, with the main Shanghai stock index having fallen nearly 10 per cent so far this year.
The Shanghai exchange is trying to stage a comeback. It began lobbying the CSRC last year to allocate it more mid-sized companies for listing, igniting a battle between the two bourses for IPOs, according to exchange officials.
Chen Xuebin, a professor of finance at Fudan University in Shanghai, said the allocation system was far from ideal.
'It shouldn't be a battle of policy directions,' Chen said. 'Instead, the exchanges should fine-tune their listing procedures and regulations to woo IPO applicants.'
Funds raised (including IPOs and refinancing deals)
Shanghai Stock Exchange (b yuan): 196
Shenzhen Stock Exchange (b yuan): 62
Shanghai Stock Exchange (b yuan): 657
Shenzhen Stock Exchange (b yuan): 117
Shanghai Stock Exchange (b yuan): 207
Shenzhen Stock Exchange (b yuan): 123
Shanghai Stock Exchange (b yuan): 334
Shenzhen Stock Exchange (b yuan): 171
Shanghai Stock Exchange (b yuan): 543
Shenzhen Stock Exchange (b yuan): 344
2011 (year to date)
Shanghai Stock Exchange (b yuan): 210
Shenzhen Stock Exchange (b yuan): 383
Sources: Shanghai and Shenzhen stock exchanges