China expands registration-based IPO system to ChiNext

A total of 18 companies listed under the new system, raising about RMB20 billion ($ 2.9 billion) with an average issuing price-to-earnings ratio of 39.3. They all rose sharply on their August 24 debut, helping the ChiNext Index post a 1.98% gain for the day.

ChiNext is positioned as China's NASDAQ-style board for small-cap growth companies. It is a popular route for VC-backed businesses, facilitating around 150 liquidity events since 2017. Only the Shanghai A-share market has been more prolific. Approximately $1.5 billion has been raised through 20 IPOs by companies with financial sponsors so far this year. This compares to 43 and 17 on the Star Market and A-share market, respectively.

Registration-based approvals systems are intended to speed up the listing process. The average application period for ChiNext is expected to fall from two years to about two months. In addition, it is hoped that these systems improve transparency and allow the market to play a more significant role in pricing.

Chinese Vice Premier He Liu said at a ceremony marking the system's debut that the ChiNext reforms will pave the way for similar changes on the main board and the SME Board. This is in line with CSRC’s earlier statement that it will evaluate the Star Market and ChiNext pilot projects with a view to rolling out registration-based systems more widely.

Trading rules have also changed. From August 24, during the first five days of trading there will be no daily limit on how far a stock price can move. Thereafter, a 10-20% limit will apply, which is in line with the Star Market. Meanwhile, companies that do not surpass RMB500 million in market capitalization for a period of 20 consecutive trading days will be delisted.

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• Topics
• Greater China
• IPO
• Regulation
• China
• CSRC