Slump in stock market threatens new Shanghai tech board, may even lead to postponement
- Limited access for retail investors that dominate country’s equity markets is a concern
- Board’s prospects could be all right if market stays in ‘reasonable range’
A sell-off in Chinese stocks threatens to take the fizz out of one of the country’s biggest capital market reforms in years.
Sentiment has soured just as China plans to open a Nasdaq-style board, expected as soon as next month. After surging at the start of the year, the Shanghai Composite Index has tumbled 11 per cent from an April high. It suffered its biggest loss since 2016 on Monday after US President Donald Trump threatened to impose higher tariffs on Chinese imports. Worst still, given the nature of the new board, the ChiNext gauge of technology stocks fell even harder.
“The slump in the stock market will definitely impact progress of the new tech board,” said Jiang Liangqing, a Beijing-based fund manager at Ruisen Capital Management. “If the Shanghai benchmark falls below the year’s low, it might be a serious problem and may even lead a postponement of the board.”
Neither China’s securities regulator nor the Shanghai Stock Exchange immediately responded to requests for comment.
It is not the first time China’s reform efforts have encountered bumps in the road. The equity market rout last year – when US$3 trillion was wiped from the market after it hit a January high – derailed plans for China depositary receipts, while proposals for another listing venue for so-called strategic emerging industries went south in 2016.
China is introducing the Science and Technology Innovation Board to encourage its innovative companies to list at home. Its rules are more closely aligned with global bourses, and regulators have waived restrictions on how companies are priced when they list. They have also limited access for retail investors who dominate the country’s equity markets.