China’s New Tech-Based STAR Exchange Surges on First Day of Trading

July 22, 2019

By Rebecca Heilweil

In an effort to take on the world’s biggest stock exchanges China debuted a new trading board Monday called the Science and Technology Innovation Board (or the STAR Market), raising the equivalent of $5.4 billion on its first day.

The Shanghai-based exchange is meant to compete with the Nasdaq, the second-largest stock exchange in the world after the New York Stock Exchange, and is part of a broader effort by China to both boost its domestic tech manufacturing business and to woo large technology companies away from pursuing public offerings abroad or in Hong Kong.

“China’s had a lot of difficulty of getting its markets up to speed to compete not just with U.S. markets, but with Hong Kong,” Joel Griffith, a research fellow at the Heritage Foundation, a conservative think tank, told Cheddar.

This new board makes changes to the public offering process that will make debuting on the STAR Market more similar to how a company might list with its U.S. peers.

For instance, companies don’t necessarily have to be profitable in order to list on STAR, bucking China’s history of requiring companies to make a profit before listing publicly. Companies can also register for a public offering on STAR, rather than needing to seek explicit regulator approval.

The STAR market is debuting with 25 companies, including semiconductor manufacturer Anji Microelectronics Technology and the industrial electronics screen-testing company Suzhou HYC Technology. Every stock on the exchange surged throughout trading, though other outlets have noted that China’s state propaganda can influence initial share prices.

100 other companies are reportedly waiting to list on the exchange.

Despite the success seen on day one of the exchange, Griffith cautions that STAR could face more challenges in the days ahead. “China — their economy — even though it has been growing for decades if you look at some of their competitors — South Korea, Japan, Taiwan, the countries they’re trying to emulate — they were far larger at this point in their rapid growth than China is now.”

Also, the opening comes as Chinese tech companies face rebuke in the global markets, including, most recently, the U.S.’s effective ban on embattled Chinese telecoms giant Huawei.

STAR Market is not the first Nasdaq competitor China has attempted to introduce. The country introduced similar trading exchanges Chi Next and New Third Board in 2009 and 2013, respectively.