White Collar

Shanghai new board has to compete with Shenzhen, Beijing and Hong Kong

Does that mean too many boards for technology firms?

PUBLISHED : Monday, 28 December, 2015, 12:30pm
UPDATED : Monday, 28 December, 2015, 6:59pm

Technology firms should be happy to learn Beijing last Wednesday gave the green light to the Shanghai Stock Exchange to create a new board for innovative companies. But we have to ask a question whether we have too many boards doing the same thing already.

How is this new board different from similar bourses that are already operating in China?

The State Council said last Wednesday in a meeting chaired by Premier Li Keqiang mandating the establishment of the new board by Shanghai to support innovative companies while existing laws and regulations would be fine-tuned to encourage the relisting of overseas-traded Chinese technology firms on the A-share market.

A new board will definitely offer choices for the many Chinese technology companies that list in the US to consider shifting back to list in Shanghai.

In Hong Kong, we launched the GEM since 1999, which is supposed to be the city’s version of Nasdaq. Its track record is not so brilliant as it can only attract 219 companies to list compared with the 1,640 companies listed on the main board.

The turnover and market cap of the GEM account for about 1 per cent of the main board. The problem of the GEM is that its threshold is too high for new start-ups while most up and running companies would prefer to wait by producing a profit so they can list on the main board which enjoys a higher turnover and a better reputation.

Shenzhen also has its own version the Nasdaq style of ChiNext, which is considered a notch above the GEM in Hong Kong. The ChiNext now has 489 listed companies and the turnover is almost as high as those in the main board at over 100 billion yuan a day.

Then there is the so-called new third board in Beijing, which is the official name of the National Equities Exchange and Quotations which has 5,016 companies including many technology, biochemical and new industry stocks. In terms of the number of listings, it has more than the combined number of 2,700 companies listed in Shanghai and Shenzhen.

However, the turnover stood at only 9.26 billion yuan last Friday as the board is restricted to professional investors while the listing threshold is so low that not all investors have confidence in these new players.

Let’s remember the traditional strength of the US in attracting technology firms to list and the Shanghai market may not find it easy to compete with exchanges such as the NASDAQ in New York.

With that in mind, we can expect the Shanghai new board will face challenges in positioning itself to compete for the pie of emerging industries.

For Hong Kong, the Securities and Futures Commission chairman Carlson Tong Ka-shing said earlier they would review the GEM and other listing rules regime to make improvements. How to revamp the GEM and to let the city to compete with Shanghai’s new board will definitely be something on the agenda.