A Recap of Eight Developments on “Eight Measures” Half Year into Its Implementation

Edited and Translated from Yicai

On June 19 this year, China Securities Regulatory Commission issued the Eight Measures on Deepening the STAR Market Reform and Serving Scientific and Technological Innovation and the Development of New Quality Productive Forces (hereinafter referred to as the "Eight Measures"), proposing a package of reform measures and pointing out the direction for the STAR Market reform. The implementation of the Eight Measures has gone well. In particular, positive progress has been made in activating the M&A market, optimizing the issuance and underwriting system, and accelerating the research and development of index products. The details are as follows:

First, the STAR Market shows precise support for "hard technologies", and positive signals on issuance and listing including unprofitable enterprises' IPO acceptance continue to release. Since the issuance of the Eight Measures, new IPO applications of four enterprises have been accepted by Shanghai Stock Exchange (SSE) STAR Market. The applications from unprofitable ESWIN and the spin-off of a listed company Fine Motion Technology were both accepted in November. The review process is progressing smoothly, with 5 companies approved at the Listing Committee and six companies registered. Secondly, the M&A market has seen a substantial uptick in activity, with key cases involving the acquisition of unprofitable assets and diversification of payment tools. Since the issuance of the Eight Measures, more than 50 new equity acquisitions have been disclosed on the SSE STAR Market, all of which are industrial M&A, with a total transaction amount of over RMB 13 billion. The number of transactions has more than doubled compared with the same period last year, including 11 major asset restructuring, 14 acquisitions of unprofitable assets, three acquisitions of enterprises to be listed, and nine overseas M&As. Third, the criteria for identifying "asset-light, R&D-intensive investment" have been released to diversify the stock and bond financing toolbox for high-quality science and technology enterprises. In October, the SSE issued rules related to the criteria for identifying "asset-light, R&D-intensive investment". The rules align with the R&D-driven and technology-intensive characteristics of STAR Market enterprises, clarify quantitative indicators, and improve the transparency and predictability of follow-on offering. SSE STAR Market companies have responded positively. Fourth, the pilot issuance and underwriting system has been implemented, creating more well-ordered IPOs. A series of issuance and underwriting rules—such as a 3% elimination ratio and new stock market value placement arrangement—have been first tested on the STAR Market. After the introduction of the Eight Measures, new regulations are issued every quarter to further strengthen the value discovery function of the STAR Market and improve the order of IPOs. Fifth, the STAR Market index system has expanded, with continued launches of new ETFs. The index system of the STAR Market has improved, with the pace of developing new indexes in such types as scale, theme, and strategy accelerating. The total number of STAR Market indexes has reached 25, and its market influence is growing day by day. ETF products have been rolled out. As of now, there are 35 STAR Market ETFs listed on the SSE, which have become an important channel for funding the "hard technology" industry. Sixth, the "corporate value and return enhancement" initiative has been thoroughly implemented to improve corporate quality and investment value. At present, 470 SSE STAR Market companies have disclosed their "Corporate Value and Return Enhancement" Action Plan 2024, accounting for over 80% of the total. High-quality "hard technology" companies, mainly including those in the integrated circuit and bio-pharmaceutical sectors, are gradually unleashing their development potential. The amount of share increases and buybacks has reached a new high, with 70% of STAR Market companies conducting share increases or buybacks since going public, amounting to over RMB 35 billion. Seventh, the supervision of STAR Market companies has been strengthened comprehensively. After the release of the Eight Measures, the SSE has leveraged better incentives and stricter supervision to guide listed companies, intermediaries, and other market players to jointly maintain a standardized and orderly market ecosystem on the SSE STAR Market. Eighth, the efforts of all market participants have been united to actively foster a favorable market ecosystem. After policy introduction, the SSE has rallied the efforts of all market participants, conducted regular researches and visits on listed companies, and enhanced investor education and services, so as to create a favorable market ecosystem.

Excerpted from Yicai on December 19, 2024

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The above information is provided for reference purposes only and does not constitute investment advice.