Hang Seng Index

China stocks rise for second day over optimism that regulator will fast track listings by ‘unicorns’

Hong Kong market reports biggest gain in three weeks as trade war concerns ease

PUBLISHED : Tuesday, 06 March, 2018, 9:32am
UPDATED : Tuesday, 06 March, 2018, 10:49pm

Mainland China stocks rose for a second day on expectations that regulators will fast track listings by “unicorns” to bolster the development of new economy industries and support the country’s economic transition.

Shares in Hong Kong also rose, reporting their biggest gain in about three weeks as concerns about a global trade war eased.

The Shanghai Composite Index rose by 1 per cent, or 32.72 points, to 3,289.64 at the close on Tuesday, extending a 0.1 per cent gain made the day before. The Hang Seng Index rallied by 2.1 per cent, or 624.34 points, to 30,510.73.

The general manager of Shenzhen Stock Exchange said domestic listings of unicorns, or start-ups that are valued at more than US$1 billion, would be a priority this year. Elsewhere, the China Securities Regulatory Commission is expected to vet an initial public offering application by Foxconn Industrial Internet this week, which will allow it to jump the queue.

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Wooing domestic listings by big Chinese companies in the technology, financial technology and biological sectors represents an uphill but important task for the securities regulator and the Shanghai and Shenzhen bourses, as Chinese laws and listings rules set a higher bar for profitability for IPO sales, impeding unicorns aiming to go public at home. This has forced the likes of Alibaba Group Holding, which owns the South China Morning Post, and Tencent Holdings to list overseas, drawing complaints from Chinese investors that they have missed out on the best investment opportunities in the new economy era.

“There is a lot of media hype around the issue, and the listing process of these unicorns is expected to be accelerated,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai. “The market focus may be in for a change this year, as more technology stocks are likely to draw attention from investors.”

Stocks linked with unicorns jumped on Tuesday. Henan Ancai Hi-tech, a maker of glass screens for monitors, soared by its daily limit of 10 per cent to 9.16 yuan (US$1.44). The company’s No. 2 shareholder, Fuding Electronics Technology, is a subsidiary of Foxconn Technology Group. Shares in Shenzhen Jingquanhua Electronics, a supplier for Foxconn, also rose by 5.1 per cent to 34.44 yuan.

Hefei Urban Construction, whose controlling shareholder has a stake in China’s most valuable fintech start-up, Ant Financial, through a subsidiary, surged by 10 per cent to 12.11 yuan. PCI-Suntek Technology, which has invested in state-backed artificial intelligence start-up Cloud Walk, surged by 5.2 per cent to 10.31 yuan.

We plan to offer a fast track for unicorns to list on the Shenzhen Stock Exchange
Wang Jianjun, general manager, Shenzhen Stock Exchange

The review of Foxconn Industrial Internet’s IPO application by the regulatory commission on Thursday is being viewed as the latest sign of regulatory support for the quick listing of unicorns. It only took 27 days for the company to proceed to the vetting stage after the regulator accepted its application, compared with an average of 519 days for ordinary companies, according to Shenwan Hongyuan Group.

The Shenzhen Stock Exchange’s tone is even more direct. “Our top priority this year will be to serve the real economy, in particular the new economy, as we plan to offer a fast track for unicorns to list on the Shenzhen Stock Exchange,” Wang Jianjun, the bourse’s general manager, said on Monday.

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Traders are also watching closely for any key policy decisions coming out of the “Two Sessions”, the fortnight-long legislative and advisory political meetings being held in Beijing, including the constitutional change regarding presidential terms, the reorganisation of top financial regulatory bodies and the appointment of new vice-premiers and the central bank governor.

In Hong Kong, the Hang Seng China Enterprises Index, known as the H-share gauge, rose by 2.7 per cent. Stocks in Asia also rebounded after the US House speaker Paul Ryan urged President Donald Trump to reconsider tariffs on steel and aluminium.

Forty-four out of the 50 member stocks on the Hang Seng Index rose, with four falling and two finishing unchanged.

Technology and financial stocks were among the biggest gainers. Tencent climbed by 3.2 per cent to HK$438.60 (US$55.99) and Sunny Optical Technology rose by 1.5 per cent to HK$131.90. AIA Group gained 3.2 per cent to HK$64.55 and Ping An Insurance Group advanced by 3.6 per cent to HK$83.50.