Shenzhen Will Promote "Restoring The Listing Function Of The Main Board Of Shenzhen Stock Exchange", And A-Share Registration System Is Expected To Inject Fresh Blood

After 20 years of IPO suspension, the main board of Shenzhen stock exchange is expected to usher in fresh blood.

Recently, the 17th plenary session of the sixth Shenzhen Municipal Committee of the Communist Party of China deliberated and approved the proposal of the Shenzhen Municipal Committee of the Communist Party of China on formulating the fourteenth five year plan for the national economic and social development of Shenzhen City and the long-term goal for the year of 2035, which states that it is necessary to "build a global innovation capital formation center, support the innovation and development of Shenzhen Stock Exchange, and promote the restoration of Shenzhen securities." The listing function of the main board of the exchange will improve the multi-level capital market system. "

This statement immediately triggered a heated discussion in the market, which means that the IPO of Shenzhen main board, which was suspended after 2000, is expected to resume and usher in fresh blood.

As the first board of Shenzhen Stock Exchange, the main board of Shenzhen Stock Exchange has lagged behind the small and medium-sized board and gem of Shenzhen Stock Exchange in terms of the number of listed companies and the scale of market value. As of December 31, 2020, there are 994 and 768 listed companies on the SME board and the gem respectively, with market value reaching 13.47 trillion and 10.73 trillion respectively, while there are only 459 listed companies on the main board, with a total market value of 9.72 trillion.

In the view of industry insiders, with the smooth implementation of the registration system on the science and technology innovation board and the growth enterprise market, A-share is expected to fully launch the registration system in 2021-2022, the main board is about to usher in a normalized IPO, and the multi-level capital market will be further improved.

Shenzhen stock market main board IPO suspended for 20 years

The main reason why Shenzhen Stock Exchange's resumption of listing function is that it has stopped IPOs for 20 years.

In 2000, in order to "prepare for the establishment of gem", Shenzhen Stock Exchange suspended the IPO business for more than three years. But then because of the first Internet bubble burst, the US NASDAQ index plummeted, the gem process suddenly ended.

From 2000 to 2002, the funds raised by Shenzhen stock exchange were 62.9 billion yuan, 23.5 billion yuan and 14.2 billion yuan respectively. In order to prepare for the gem, the financing amount of Shenzhen Stock Exchange in 2001 and 2002 decreased by 62.3% and 77.4% respectively compared with 2000. The proportion of Shenzhen Stock Exchange's financing amount in Shanghai and Shenzhen stock markets dropped from 41.2% in 2000 to 19.9% in 2001 and then to 18.2% in 2002.

Then, in 2004 and 2009, after the small and medium-sized board and the growth enterprise market were founded one after another, the Shenzhen Stock Exchange IPO was only issued in the small and medium-sized start-up market, and the main board IPO of Shenzhen stock market stagnated.

After excluding the companies that landed on the main board of Shenzhen stock exchange through share exchange and additional B-share issuance, Zoomlion was the last IPO company on the main board of Shenzhen Stock Exchange on September 15, 2000, which was 20 years ago.

After Zoomlion's IPO, the pilot work of issuing additional A shares by pure foreign-funded (B-share) listed companies was launched in Shenzhen Stock Exchange. After the successful trial of Changyu a, Chenming B, Lutai B, BOE B and other pure foreign-funded companies successively completed the A-share issuance and landed on the main board of Shenzhen Stock Exchange.

In addition, there are 7 companies that have landed on the main board of Shenzhen Stock Exchange by way of share exchange, namely, Jidian, TCL group, Weichai Power, Midea Group, Shenwan Hongyuan, zhaoshang Shekou and zhaoshang highway. Among them, China Merchants highway acquired and merged North China Expressway by stock exchange, and was listed on the main board of Shenzhen Stock Exchange on December 25, 2017, becoming the latest listed company on the main board.

"At the beginning, the Shenzhen Stock Exchange was still inclined to develop the small and medium-sized board and the growth enterprise market, that is, it mainly connected with small and medium-sized innovative enterprises or small and medium-sized traditional enterprises. In terms of market division, the Shanghai stock exchange mainly undertakes the main board. The early Shanghai and Shenzhen stock exchanges were more subject to administrative control in terms of development pattern. Basically, they followed the "big pot meal" under the planned economy. The average development was also fair in the number of IPOs, and the number of listed companies was basically equal. But now the development has its own characteristics. " Dong Dengxin, director of the Institute of Finance and securities of Wuhan University of science and technology, pointed out in an interview.

From the transaction amount observation, based on the data on December 31, 2020, the transaction amount of a shares on the main board of Shenzhen stock exchange is 124.363 billion yuan, while that of the medium and small board and the growth enterprise market in the same period reaches 207.516 billion yuan and 179.294 billion yuan respectively.

As of December 31, 2020, there are 459 A-shares on the main board of Shenzhen Stock Exchange, with a total market value of 9.72 trillion yuan. Wuliangye, as the largest market value of Shenzhen stock market, has the latest market value of 1.11 trillion yuan. In addition, there are five listed companies, Midea Group, Ping An Bank, Gree Electric appliances, Luzhou Laojiao and Vanke A, with a market value of more than 300 billion yuan.

In the GEM market, the total market value of Ningde era, the "first brother", has exceeded 800 billion. In addition, the total market value of three companies, namely, golden dragon fish, Mindray medical and Aier Ophthalmology, has also exceeded 300 billion. In the small and medium-sized board market, there are five enterprises with a market value of more than 300 billion, including BYD, Hikvision, SF holdings, Lixun precision and Yanghe shares.

It is worth mentioning that in recent years, with the strong implementation of the delisting system, 52 companies on the main board of Shenzhen Stock Exchange have been delisted (delisted) one after another, which urgently needs fresh blood to flow in and replenish.

Comprehensive registration system to be launched soon

In 2020, with the steady implementation of the registration system in the stock market, in the view of market participants, the experience of the registration system of the science and technology innovation board and the growth enterprise market will soon be extended to the main board and small and medium-sized board markets. The resumption of listing and issuing function of the main board of Shenzhen stock market is an important part of the implementation of the registration system in the whole market.

As early as October 2020, when reporting to the Standing Committee of the National People's Congress on the work related to the reform of the registration system for stock issuance, Yi Huiman, chairman of the China Securities Regulatory Commission, said: "after the pilot projects of the science and technology innovation board and the growth enterprise market, the conditions for implementing the registration system in the whole market are gradually in place."

The Fifth Plenary Session of the 19th Central Committee of the Communist Party of China further proposed to comprehensively implement the registration system of stock issuance, establish a normalized delisting mechanism, and increase the proportion of direct financing.

At present, preparatory work has been started at the level of the exchange. Wang Jianjun, chairman of the Shenzhen Stock Exchange, said at the general meeting of the Shenzhen Stock Exchange in 2020 that he would deeply summarize the experience of the gem reform and pilot registration system, and make preparations for the full implementation of the registration system for stock issuance.

According to the market forecast, the comprehensive registration system is expected to be implemented in 2021-2022.

The small cap team of open source Securities pointed out that the registration system is expected to be fully implemented in 2021, and improving the quality of listed companies will be the focus of the next stage of reform. "As the main board and the small and medium-sized board are the two plates with the longest history, the largest market value and the most diverse attributes of listed companies, the registration system reform is more complex. However, with the successful reform experience of the science and technology innovation board and the growth enterprise market, it is expected that the conditions for the registration system reform of the main board and the small and medium-sized board will be basically mature in 2021. "

Zhang Yan, a senior researcher at baishaquan M & A Financial Research Institute, also pointed out to reporters of the 21st century economic report that "if the specific rules of the registration system run in and are optimized quickly, and the market has a high degree of implementation and acceptance of the rules, then it is optimistic that the transition period for the full implementation of the registration system will be over in two years."

Specifically, under the background of the comprehensive introduction of registration system, the merger of small and medium-sized board and main board is a high probability event.

Dong Dengxin pointed out that the future Shenzhen Stock Exchange may adopt "two in one" in the recovery of the main board and the reform of the small and medium-sized board, which combines the traditional main board with the current small and medium-sized board. That is to restore the original status of the main board of Shenzhen Stock Exchange, the original small and medium-sized board will not have the value of existence. Of course, gem will continue to strengthen its market characteristics and develop from scientific and technological innovation enterprises and high-tech enterprises.

"Once the main board of Shenzhen Stock Exchange resumes business, the small and medium-sized board will be merged into the traditional main board, collectively known as the main board of Shenzhen Stock Exchange. In this way, Shenzhen Stock Exchange has a main board and a growth enterprise board; Shanghai Stock Exchange has a main board and a science and technology innovation board. Such a market structure is relatively reasonable. The Shanghai and Shenzhen exchanges can form a relatively differentiated and complementary competition, making the market more unified and standardized, and the market structure will be more simple and clear. " Mr Tung added.

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