On the occasion of the fifth anniversary of the establishment of the STAR Market, a comprehensive set of deepening reform measures has been introduced.
On June 19, 2024, the Lujiazui Forum opened in Shanghai. At the forum, China Securities Regulatory Commission (CSRC) Chairman Wu Qing announced a number of reform measures, the most important of which is the "STAR Market 8 Articles." The new round of reforms will further highlight the "hard technology" characteristics of the STAR Market, improve the mechanisms of issuance and underwriting, mergers and acquisitions, equity incentives, and trading, to better serve the development of scientific and technological innovation and new quality productive forces.
Yan Hong, the Academic Vice President and Professor of Finance at Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University, told Yicai that the STAR Market is a very important part of China's scientific and technological innovation development and the construction of Shanghai's "five centers."
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He believes that on the occasion of the fifth anniversary of the STAR Market, the CSRC's announcement of the "STAR Market 8 Articles" has systematically demonstrated the goals and measures of deepening reforms. With further reforms and improvements of the STAR Market, it is expected to serve hard technology companies more effectively. The development of hard technology companies itself is the strengthening of new quality productive forces. At the same time, further reforms and improvements of the STAR Market will also help Shanghai to accelerate the construction of the "five centers," especially the construction of the international financial center and the scientific and technological innovation center.
Yicai reporters learned from sources close to the regulatory authorities that the "STAR Market 8 Articles" are in line with the new "Nine National Articles" and the "STAR Market 16 Articles," but are more practical, accurate, and detailed. "The document's expression is quite principled, but behind each article, there are corresponding practical solutions, with a timetable and to be implemented." The source said that it is expected that in the coming period, the corresponding reform measures will gradually be implemented in the form of rules, policies, or cases.
The "STAR Market 8 Articles" and more than 30 specific items, each item must have measures implemented.
On the afternoon of the 19th, the CSRC issued the "Eight Measures on Deepening the Reform of the STAR Market to Serve Scientific and Technological Innovation and the Development of New Quality Productive Forces" (hereinafter referred to as the "STAR Market 8 Articles"), launching a new round of deepening reforms of the STAR Market, aiming to enhance the STAR Market's inclusiveness for new industries, new business models, and new technologies, and to better play the role of the capital market, serving the overall situation of Chinese-style modernization.
The CSRC stated that it will focus on key points and combine long-term and short-term, introducing a package of reform measures. In particular, in response to the market's more concentrated concerns about high-priced over-subscription of new shares, active mergers and acquisitions market, and strengthening the supervision of listed companies, the "STAR Market 8 Articles" have made corresponding arrangements, which not only actively respond to market concerns but also accumulate experience and create conditions for the next comprehensive deepening of the capital market reform.
According to Yicai reporters' collation, the "STAR Market 8 Articles" document mentioned as many as more than 30 specific contents. The practical issues that the market is concerned about, such as how to determine technology companies, the listing of unprofitable technology companies, the market value distribution of STAR Market stocks, and the installment payment of mergers and acquisitions, have all been responded to in the document.
The first article clearly states the strengthening of the STAR Market's "hard technology" positioning. This includes: strictly controlling the entry, giving priority to supporting "hard technology" companies that break through key core technologies in the fields of new industries, new business models, and new technologies to go public on the STAR Market. Further improve the precise identification mechanism for technology companies. Support high-quality unprofitable technology companies to go public on the STAR Market.First Financial Daily reporters have learned from sources familiar with policy formulation that the "Science and Technology Innovation 16 Articles" previously proposed to strengthen the hard technology positioning of the STAR Market and required the improvement of identification mechanisms. This is a continuation of the same vein, aiming to further promote the system forward. Relying on the market-oriented "winnowing" approach does not fully conform to Chinese practice. The next step is still to lead with clear rules and explore the establishment of a more precise identification mechanism.
The second article proposes to carry out a pilot of deepening the issuance and underwriting system. This includes optimizing the pricing mechanism for new shares, piloting adjustments to the high price exclusion ratio applicable to new share pricing, improving the allocation of new shares on the STAR Market, increasing the allocation ratio for offline investors with a long-term holding intention, strengthening the supervision of inquiry and quotation behavior, studying the establishment of a "white list" system for professional offline investors, and strictly adopting qualification restrictions and other measures against institutions that frequently quote high prices.
According to the reporter's understanding, the proportion of STAR Market companies held by investors in the new share subscription is relatively low. There are also many discussions in the industry about the pricing process of STAR Market companies, such as concerns that issuers deliberately raise prices to issue more, intermediaries report high prices in investment value reports to win entry, and retail investors chase and quickly reduce their holdings in new shares.
The specific response measure of this time is to take the lead in implementing the "high calculation" of the exclusion ratio on the STAR Market. At the same time, while respecting the investor structure dominated by retail investors, this reform also hopes to encourage institutions with a longer-term investment intention to participate in the pricing. In the market value distribution process, it encourages holding STAR Market stocks, attracting more patient capital to invest in the STAR Market.
The third article proposes to optimize the stock and bond financing system of listed companies on the STAR Market. This includes establishing a "green channel" for stock and bond financing and mergers and acquisitions reorganizations for "hard technology" enterprises that undertake key core technology research, and exploring the establishment of recognition standards for "light assets and high R&D investment". It also promotes the pilot cases of shelf issuance of refinancing to be the first to land on the STAR Market.
The reporter understands that there have always been some difficulties and blockages in stock and bond financing, and some policies are difficult to implement. The purpose of this reform is to form as clear standards as possible to meet the financing needs of STAR Market enterprises.
"The actual refinancing needs of STAR Market enterprises are often frequent and the amount per time is small, but under the current mechanism, when enterprises finally do a financing, they will try to finance as much as possible, which leads to problems such as idle funds and investor dissatisfaction. The shelf issuance introduced by this reform is aimed at solving such problems and is more in line with the financing characteristics of technology companies." The aforementioned policy familiar person told the reporter.
The main content of the fourth article is to support mergers and acquisitions with greater strength. This includes supporting listed companies on the STAR Market to carry out mergers and integrations in the upstream and downstream of the industrial chain, increasing the tolerance of merger and acquisition valuation, supporting listed companies on the STAR Market to acquire high-quality unprofitable "hard technology" enterprises, enriching the payment tools for mergers and acquisitions, and conducting research on the installment payment of share consideration. It also supports listed companies on the STAR Market to focus on optimizing and strengthening their main business through absorption mergers.
Compared with previous support policies for science and technology innovation, the "8 Articles of the STAR Market" have a lot to say about mergers and acquisitions, and have further relaxed in terms of merger targets and payment methods. At the same time, the Securities Regulatory Commission will also take measures to encourage intermediaries to be real "deal matchmakers", not "document drafters".
The fifth article proposes to improve the equity incentive system. This includes increasing the precision of equity incentives and better aligning interests with investors. It also includes improving the implementation procedures for equity incentives of listed companies on the STAR Market, optimizing the application of short-line trading, window period and other regulations, and studying the optimization of the arrangement for equity incentives to reserve rights and interests.Technology companies have a strong demand for equity incentives. However, in past practices, there have been issues such as restrictions on window periods and unclear identification of short-term trading. This reform will further simplify these restrictions, leaving more room for maneuver.
The focus of Article 6 is to improve the trading mechanism and prevent market risks. This includes: strengthening trading supervision, studying and optimizing the market maker mechanism and after-hours trading mechanism of the STAR Market, enriching the STAR Market index, ETF categories, and ETF option products. The aforementioned measures will further create conditions for medium and long-term capital to enter the market.
Article 7 focuses on regulation, proposing to strengthen the full-chain supervision of listed companies on the STAR Market. This includes: strictly cracking down on market malpractices such as fraudulent issuance and financial fraud on the STAR Market, more effectively protecting the legitimate rights and interests of small and medium investors. It guides the founding team, core technical personnel, etc., to voluntarily extend the lock-up period of shares. Optimize the "reverse hook" system for the exit of private equity venture capital funds. Strictly implement the delisting system.
The new "Nine National Articles" propose many requirements for risk prevention and strengthened regulation, and the STAR Market also needs to implement full-chain supervision requirements. According to the reporter's understanding, to further facilitate the exit of private equity funds, the next step will further optimize the "reverse hook" system in terms of reduction ratios and intervals.
Article 8 clarifies the active creation of a good market ecology. This includes: promoting the optimization of the judicial guarantee system and mechanism of the STAR Market. Strengthen collaboration with local governments and relevant ministries and commissions, carry out regular visits to listed companies on the STAR Market, and jointly promote the improvement of the quality of listed companies. Deeply implement the "improving quality and efficiency, focusing on returns" action, and strengthen investor education services.
After more than five years of development, the STAR Market has gradually shown its effectiveness in serving high-level technological independence and self-improvement. At the 2024 Lujiazui Forum, Shanghai Stock Exchange Chairman Qiu Yong introduced that, to date, the STAR Market has listed 573 companies with a total market value of over 5 trillion, and the cumulative financing for five years has exceeded one trillion yuan.
"At present, the new generation of technology, high-end equipment manufacturing, and biomedicine account for 80% of more than 500 companies, forming a complete industrial chain in many fields, and the STAR Market has helped scientific and technological innovation to move from 'point breakthroughs' to 'systematic improvements'." He introduced that in 2023, the R&D intensity of companies on the STAR Market was 12.2%, more than three times the average of A-share companies.
In addition, more than 400 of the more than 500 companies have implemented equity incentive plans, covering more than 90,000 core personnel. From 2019 to 2023, the compound annual growth rate of operating income and profits was 23% and 24%, respectively. Ninety percent of the companies on the STAR Market received venture capital investment before going public, with an average investment of about 930 million yuan per company.
However, the STAR Market is still a new thing in reform. In recent years, with the rapid changes in the market situation, there have been some new situations and problems in the development and registration system operation of the STAR Market. For example, the support for the development of "hard technology" enterprises is not precise and effective enough, and the strength needs to be increased; the inclusiveness and adaptability of the basic systems such as new stock issuance pricing, refinancing, mergers and acquisitions, and equity incentives are still insufficient; the strength of regulatory law enforcement and investor protection is still short of market expectations, and so on. These issues must be resolved through more vigorous reforms.Following the Central Financial Work Conference, the State Council recently issued the new "Nine National Measures," and the China Securities Regulatory Commission (CSRC) released 16 measures to support technological innovation. Today, the CSRC announced eight measures to support the development of the Science and Technology Innovation Board (STAR Market), which will play a positive role in the development of the STAR Market and the capital market's support for technological innovation.
Qiu Yong said that as an exchange, there are two important missions ahead. The first is how to enhance the market's inclusiveness to support technological innovation. The second is how to strengthen regulatory efforts to protect the legitimate rights and interests of investors, especially in combating fraud and promoting the construction of the capital market ecosystem.
In the industry's view, many aspects of the "STAR Market Eight Measures" face significant challenges. For example, how to further improve the precise identification mechanism for technology companies? Or, how to explore and establish criteria for "light assets, high R&D investment," turning these seemingly simple eight words into actionable guidelines through systems and rules? These are issues that regulatory authorities are currently working hard to promote.
The "STAR Market Eight Measures" cover various aspects, but the key lies in their implementation. On the afternoon of the 19th, the first measure was put into effect. The Shanghai Stock Exchange announced that to implement the opinions related to the "STAR Market Eight Measures," it would further strengthen the constraints on offline pricing, and the STAR Market would pilot a unified 3% highest price exclusion ratio.
According to the CSRC, the next steps will involve promoting the deepening and solidification of the stock issuance registration system, steadily advancing the implementation of various policy measures to deepen the reform of the STAR Market, dynamically assessing and optimizing relevant institutional rules, and after forming replicable and promotable experiences, smoothly and orderly extending them to other market segments, continuously deepening the capital market's function in serving high-level technological self-reliance and the development of new quality productive forces.
Yan Hong said that the "STAR Market Eight Measures" will play a very important role in further improving the STAR Market. The STAR Market is not an independent market; it is a part of the entire capital market. The reform of the STAR Market will definitely benefit other market segments in the future, and the reform and improvement of the entire capital market will also better promote the development of the STAR Market.
In his view, the new "Nine National Measures" clarify the signal that strict regulation is needed alongside development, and while the "STAR Market Eight Measures" convey a clear reform mindset, they also further emphasize strict regulation, drawing clearer boundaries for the market and allowing it to function more effectively.
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