China Securities Regulatory Commission approves merger of Shenzhen exchange’s main board, SME board
- The move is aimed at simplifying the structure of trading at the bourse, regulator says
- Shenzhen main board’s listing and trading rules will remain unchanged after the merger
“The merger will optimise the trading structure of Shenzhen Stock Exchange,” the regulator said in a statement. “The main board and the ChiNext will each have their own focus and complement each other [after the merger].”
Friday’s restructuring is an important part of reforms in China’s capital markets, the regulator said. Calls for the merger have grown over the past year, after Beijing launched the Nasdaq-style Star Market at the Shanghai Stock Exchange. The SME board’s role had already been reduced with the creation of the ChiNext market for start-up firms in 2009.
“The SME board has been losing its lustre because it is no longer a choice for mainland technology firms when they consider initial public offerings,” said Yin Ran, a Shanghai-based angel investor. “The regulator has taken its time in making this decision. Some regulatory and industry officials had proposed the merger a long time ago.”
Shanghai, Shenzhen stock markets shaping up as rivals to Hong Kong in race for biotech IPO crown
The regulator said the Shenzhen main board’s listing and trading rules will remain unchanged after the merger. As of Friday, the SME board was home to 1,001 companies with a total market capitalisation of 13.7 trillion yuan (US$2.1 trillion), while 468 companies traded on the main board and were valued at 9.7 trillion yuan on aggregate.
Last year, the CSRC allowed unprofitable companies to float shares on the ChiNext. This came after the formation of Star Market in 2019. Ordered into existence by Chinese President Xi Jinping, Star Market allows listings by unprofitable companies, underlining Beijing’s determination to boost funding for innovative technology. Currently, 225 companies with a market value of 3.3 trillion yuan are listed on the board.
China’s efforts to reform its stock exchanges have increased the pressure on bourses in Hong Kong and New York. These exchanges have until now enjoyed an advantage over Shanghai and Shenzhen, which required companies to meet a stricter regulatory criteria before they could list.