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August 25, 2020

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Tech firms soar on ChiNext after historic reform

SHARES of 18 companies surged on their ChiNext debut yesterday, kicking off a historic reform.

Investors piled into the first batch of firms listed on Shenzhen’s tech-focused startup board under a streamlined system for initial public offerings that made the process less bureaucratic.

Trading restrictions were also loosened. ChiNext shares will be allowed to rise or fall by a daily limit of 20 percent, double the previous 10 percent cap. There will be no restrictions on price movements of new shares for the first five days of trading.

The 18 newly listed firms on the board all closed higher, with 10 seeing their stocks soaring by over 100 percent.

Highlighting investor frenzy, Contec Medical Systems, a high-tech company focusing on research, manufacture and distribution of medical instruments, took a huge bump up to hit an intraday peak of 2,931.5 percent, and gained 1,061.42 percent at the closing bell. Automotive cable maker Ningbo KBE Electrical Technology rocketed by 743.27 percent to be the second biggest gainer. Even the smallest gainer jumped 43 percent.

In general, the ChiNext Composite Index in the session rose 1.98 percent to 2,684.63 points, with trading volume adding up to 228.89 billion yuan.

The reform of the ChiNext and the pilot registration-based IPO system are major initiatives to optimize the basic system of the capital market after the reform of the sci-tech innovation board, said Yi Huiman, chairman of the China Securities Regulatory Commission, at yesterday’s listing ceremony.

Adopted in June 2020 after soliciting public feedback, the pilot registration-based IPO system is designed to ease enterprises’ burdens and increase transparency with an open and paperless application review process.

Aimed at improving the market’s transparency and authenticity while strengthening supervision, the system places information disclosure at its core while intensifying responsibilities of issuers and intermediary agencies as well as simplifying delisting procedures.

Yi noted that the move is of great significance to support the construction of the Guangdong-Hong Kong-Macau Greater Bay Area and Shenzhen as well as better serve the high-quality development of the real economy.

At the event, Chinese Vice Premier Liu He said the reform serves as a significant push toward optimizing China’s capital market. He said that the ChiNext board should better serve growth-oriented innovative companies, build its strength and complement other boards to form a multi-level capital market system.

He added that reform has laid the foundation for implementing registration-based rules on the main board and the SME board, which targets small and medium-sized firms.

“The capital market plays a pivotal role in optimizing resource allocation and promoting a high-level circulation of technology, capital and the real economy,” said Liu, while referring to the necessity in gradually leaving the judgement of companies’ growth outlook to market. He also stressed returning to the important concept of value investment, promoting full disclosure of information, and building an honest and law-abiding capital market.


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