China eases IPO rules for new tech board

Business | AFP and Avery Chen 1 Feb 2019

China will relax rules on initial public offerings for a planned Nasdaq-style tech board in Shanghai as it seeks to encourage start-ups to list at home after losing the likes of Alibaba and Baidu to Wall Street.

Existing rules on initial public offerings ban companies from listing unless they have a track record of profits, and put caps on their pricing and how much they are allowed to rise or fall.

But those and other constraints will be lifted or eased under rules released for the new technology board, which was announced by President Xi Jinping in November as China battles the United States for global supremacy in the sector.

The new guidelines, announced by the Shanghai Stock Exchange, remove the requirement of past profits as well as any restrictions on IPO pricing.

There will also be no limits on price movements for the first five days of trading, after which a daily 20 percent trading band will be imposed.

The trading band compares to the current standard 10-percent daily limits on China's two main exchanges in Shanghai and Shenzhen, a measure aimed at curbing excessive volatility on the country's often rumor-driven markets.

The Shanghai exchange has put the draft rules out for public comment until February 20, but proposed guidelines are rarely changed once they go public.

A launch date for the board has yet to be given.

After Alibaba and Baidu listed years ago on Wall Street and fellow tech titan Tencent (0700) opted for Hong Kong, the government is hoping to keep a new generation of technology leaders closer to home

Strict rules essentially prevented the first wave of Chinese tech giants from listing in mainland China.

But authorities are now keen to develop domestic champions into global leaders in artificial intelligence, big data, and other tech sectors in which Xi wants China to dominate.

Meanwhile, Hong Kong Exchanges and Clearing (0388) Charles Li Xiaojia, was quoted as saying the new tech board offered key advantages such as a new registration system for IPO applications and would be easily accepted by the market.

He was responding to questions on whether HKEX would introduce stock connect between Hong Kong and the new tech board.

Chinese stocks gained yesterday led by tech shares, with Shanghai's main index up 0.35 percent.

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