One year after the debut of China’s Science and Technology Innovation Board (STAR), often regarded as China’s version of the NASDAQ, it was seized by an IPO frenzy as many well-known Chinese tech giants scrambled to list on the board.
Experts said that the STAR market is increasingly capable of attracting major players in the technology sector as reforms are kicking in, although it is still relatively conservative and immature compared with boards like the NASDAQ.
The STAR market will celebrate its one-year anniversary Wednesday.
The latest tech giant that announced an IPO plan on the STAR market is Alibaba’s subsidiary Ant Financial Services Group, which said Monday that it had commenced the process of IPO on the STAR market as well as on the Hong Kong stock exchange.
Kuang Yuqing, founder of Lens Company Research, predicted that Ant Group is likely to raise $20 billion on the STAR market, hopefully becoming the biggest IPO on A-share markets.
The Shanghai Stock Exchange noted in statement that it welcomed Ant Group list on the STAR market, and that the listing demonstrates the attraction and global competitiveness of the STAR Market as the “first choice” for innovative technology companies in China for IPOs.
“The listing is also an indication that the reforms over the past year in the STAR board have enabled it to attract major players in the technology industry,” Kuang told the Global Times.
To date, the STAR market has listed more than 130 technology companies, with a total market capitalization of over 2.4 trillion yuan ($343 billion).
From Chinese artificial intelligence firm Cambricon to Semiconductor Manufacturing International Corporation (SMIC), China’s biggest chipmaker, the STAR market is now home to a number of Chinese technology firms that are well known to domestic investors.
Now, more companies are scrambling to follow suit. Aside from Ant Group, Chinese new-energy vehicle maker Hozonauto also released plans to list on the STAR market in 2021.
According to Kuang, there is still a lack of key industry leaders on the STAR board, but the situation is gradually improving and more industry bellwethers will be attracted to the board with the coming-in of industry giants like Ant Group.
Despite the STAR market’s increasing attraction to domestic companies, it is also drawing criticism in areas such as overly high valuations of stocks.
As of Friday, the share price of companies listed on the STAR market had surged 160 percent compared with their issue price.
Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, said the elevated prices are a result of the unmet investment demand, but the bubbles will not burst as the board welcomes more high-quality stocks, especially amid the homecoming of Chinese stocks from New York.
“The market-oriented pricing mechanism in the STAR board has lifted its total market capitalization, but it is healthy,” Dong said, adding that the high stock valuations will be attractive to Chinese companies caught between the US-China tensions that are looking for secondary listings.
He also stressed that the rise of Chinese technology firms will become a backbone for the board’s future growth.
People visit the Ant Financial stand at an digital economy exhibition in Fuzhou, East China’s Fujian Province on April 25. Photo: VCG
