Markets Aug 05

IPOs boom in China

In just a year, tech-heavy Star Index climbs to third-largest in world for initial sales, and growth looks likely to continue 

IPOs boom in China
Star Ascendant: The The Shanghai Stock Exchange Science and Technology Innovation Board celebrates its first anniversary last month. Photo: Star Market

(ATF) Initial public offerings (IPO) in China's A-share market surged to a record in July, with Sino-US tensions lifting the outlook for the booming initial sales market in the world’s second-largest economy.

World-beating listings such as that by Semiconductor Manufacturing International (SMIC) helped increase funds raised to 110 billion yuan ($15.73 billion), surpassing 100bn yuan in a single month for the first time, Shanghai Securities News reported Tuesday.

A total of 52 firms were listed in the month, accounting for 30% of the total number of IPOs this year, which stood at 169, the publication said.

The main board of the Shanghai Stock Exchange attracted 35 listings while the Growth Enterprise Market of the Shenzhen Stock Exchange hosted 43, the paper reported.

The STAR market twinkled brightest, however. The the science and technology innovation board of the Shanghai Stock Exchange, which was created to encourage domestic tech firms to list locally, saw 73 companies listed in the period. 

According to Bloomberg, the year-old market has raised $19.4bn this year, largely thanks to the $7.5bn raised by SMIC, the biggest sale anywhere in the world in 2020. The board now ranks as the third busiest for IPOs in the past seven months, behind the US’ New York Stock Exchange and Nasdaq, the news service said.

READ MORE: Zoom to stop direct sales in China

Rising stars of the Chinese tech world, including Alibaba’s Ant Financial, are planning to list on the exchange, part of a wider trend among Chinese firms to avoid American listings amid growing tensions between the world’s two largest economies. The flotation of Ant, which is tough to be valued at $150bn, could see the Star Market eclipse the Nasdaq for IPOs, according to The Economist. 

In July, The benchmark Shanghai Composite Index, Shenzhen Component Index and ChiNext Index, or China's NASDAQ-style board of growth enterprises, went up 11%, 13.7% and 14.7%, respectively.

Experts say that sufficient liquidity has created conditions for high-quality companies in different industries to raise funds in the A-share market, thus directing funds from the capital market to the real economy. 

READ MORE: China, US to review trade deal, discuss grievances next week