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Shanghai Stock Exchange Plans to Build Strategic Emerging Board

Date:2020-05-11 18:13:29

In order to encourage the development of and strengthen the capital market’s support for strategic emerging industries, the Shanghai Stock Exchange has announced plans to build a strategic emerging board. The board will decrease barriers to access and provide institutional arrangements for the return of overseas Chinese listed companies. According to information released to date, the strategic emerging board will be introduced simultaneously with the introduction of the new registration system for the A Shares Board, in or around early 2016.

The strategic emerging board will focus on serving enterprises in emerging industries and innovative enterprises which have passed the start-up stage and have a certain scale, especially those with strategic significance. According to the information released to date, the strategic emerging board will also focus on internet enterprises which have listed overseas. As such, there will be some overlap between the strategic emerging board and the A-Shares board and the GEM board in Shenzhen with respect to which enterprises could list on them.

According to a speech given by Shi’an Liu, the deputy general manager of the Shanghai Stock Exchange, at the “Shanghai 2015 China Equity Investment Forum,” as well as other information, the strategic emerging board might use four different sets of criteria as the basis of access to the board. Unlike the “market value + net profit + income” set of criterion, the other three sets de-emphasize the requirement of profitability, which will allow the inclusion of enterprise that are not (yet) profitable. The “market value + income + cash flow” set of criteria is suitable for enterprises which have reached a certain scale and have adequate cash flow but, for the time being, have weak profitability. The “market value + income” set of criteria is suitable for enterprises with weak profitability and cash flow levels but novel business models and which have garnered significant interest. The “market value + assets” set of criteria is suitable for enterprises with weak profitability and income but significant assets and good market prospects.

According to the information released to date, in addition to the above access conditions, the strategic emerging board will have other unique institutional arrangements. First, because the conditions for listing on the strategic emerging board are relaxed (as compared to the other boards), supervision will be strengthened in order to ensure that enterprises that list on the strategic emerging board fulfill their obligations. In addition, a simplified registration process will be implemented. Finally, with regards to de-listing, the thresholds for volume and number of shareholders will be lower than that of the A-Shares board.

Note, however, that the scheme described above is subject to approval by the China Securities Regulatory Commission and other relevant departments.
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