Gegara This, China Makes the US Hot Again in the Capital Market

Jakarta, CNBC Indonesia – Competition to attract start-up companies (startup) technology to enter and be listed on the capital market between the United States (US) via the Nasdaq Exchange and China via the Shanghai Stock Exchange and the Shenzen Exchange (Shenzhen Stock Exchange) heating up again.

After previously the Shanghai Stock Exchange released a trading board called Star Market or the Science and Technology Innovation Board on July 22, 2019, a new board for startup companies in China, now the Shenzen Exchange will have 18 new companies that will be listed on the ChiNext board.

This is the first time ChiNext has made another move to attract technology companies since China made reforms in the capital market amid the pressure of competition with the US.

The ChiNext board was actually traded on October 30, 2009. This trading board is specifically for startups on the Shenzen Exchange, similar to the US Nasdaq Exchange which trades technology companies.

This Monday, dozens of startups are ready to take the floor on ChiNext under the initial public offering mechanism (initial public offering/ IPO) with a style similar to the Nasdaq Exchange.

Thus, the Shenzhen Stock Exchange will again challenge the Shanghai Stock Exchange to trade shares of technology companies, and is judged to be fueling the “technology war” between China and the US.

On Monday 24 August, a total of 18 companies will start trading on ChiNext in the first round of registration or listing usai reformasi IPO China.

The Shenzen Exchange move comes after months of the Chinese government undertaking reforms aimed at facilitating initial public offerings or IPOs of Chinese companies and increasing financing for technology companies amid China’s and US efforts to ‘war’ to become technology masters.

According to the year-old Star Market on the Shanghai Stock Exchange, the reform of the widespread IPO mechanism will help strengthen the attractiveness of the Chinese capital market as Chinese technology companies face stiff US scrutiny and threats. delisting (removal) from the US stock exchange.

“These reforms will create very strong competitive forces between the two markets [Shanghai dan Shenzen] in attracting candidates who are listed companies, “said Wilson Chow, TMT industry leader (technology, media, and telecom) at PwC Global, quoted by CNBC International, Sunday (23/8/2020).

He also considered that the IPO reform carried out by China could also contribute to the separation between the US and China in the field of technology development, but there was a potential impact that it would lead to competition in the capital market and the telecommunications and software sectors.

“We may see a big trend of polarizing technological developments as the US and countries on par with the US can adopt their own technology systems or use their own equipment, while China and countries friendly to China can create their own standards, not unified ones. . “

The US administration under President Donald Trump has recently strengthened restrictions on Chinese technology giant Huawei Technologies and sanctioned Chinese-owned apps TikTok and WeChat. Trump also launched an initiative to exclude Chinese tech companies that are suspected of posing a national security risk.

Under the new IPO rules, the Shenzhen Exchange will inspect IPO applications against disclosure requirements. Companies who want go public nor does it require an examination by the China Securities Regulatory Commission.

Shares on the ChiNext board will also be allowed to rise or fall by up to 20% in one session, compared to the previous maximum of only 10%. This leeway provides space for trading interest in the more than 800 stocks currently listed on ChiNext.

The reforms are based on the Star Market on the Shanghai Exchange, which has become the dominant listing place for technology companies in China and surpassed the Hong Kong Stock Exchange and the New York Stock Exchange (NYSE) as the second largest IPO market in the world by fundraising value in the first half of 2020. .

Yang Tingwu, Deputy General Manager of the company hedge fund Tongheng Investment, said he was concerned that an easier and quicker change to the IPO mechanism could potentially increase China’s “very large” technology bubble.

The index of Chinese tech companies’ shares has also jumped nearly 30% this year, while shares of Chinese-listed tech companies are trading at about 60 times their revenue, compared to the Nasdaq at 37 times their revenue.

Other capital market players are also concerned that looser regulations could pose risks.

“Lower standards are likely to attract more fraudulent activity,” said Brian Bandsma, New York-based portfolio manager of Vontobel Asset Management.

“There are lots of good regulations in China. The problem is enforcement of those regulations.”

Chinese regulators have previously promised repeatedly that they will not tolerate fraud in capital markets after a spate of corporate scandals.

[Gambas:Video CNBC]



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