STAR Market

In November 2018, China's President Xi Jinping unveiled plans for a technology focused Chinese market called 'Star Market' during the opening ceremony of the International Import Expo. The Star Market was officially launched by the Shanghai Stock Exchange on July 22, 2019 with 25 listed technology stocks, and is set to have less strict trading regulations compared to other Chinese exchanges. China wants the Star Market to be the place where Chinese technology startups list their initial public offerings (IPOs), instead of listing their IPOs on exchanges located in Hong Kong or the United States.

The Star Market was created to sustain economic growth in China by shifting economic activity away from infrastructure spending and towards technological innovation. Yu Peihua, chief executive of AXA SPDB Investment Managers, shared his thoughts with reporters about why the Star Market exists by saying:

The launch of the new board is a fresh sign China has shifted its focus from quantity and pace to quality in driving economic growth. China is highlighting the role of the capital market in bolstering technology companies, and encouraging them to conduct technological innovation.

In March 2019 companies began applying to be listed on the Star Market for its launch. A total of 149 Chinese firms applied, and 28 gained approval have their IPOs take place during the launch of Star Market. During the first day of trading on the Star Market, 25 out of the 28 approved technology firms listed their IPOS on the exchange. The firms gained an average of 140% and raised a combined $5.4 billion (37 billion Yuan) from their IPOs. During the first few hours of trading 8 technology companies were suspended for ten minutes from participating in the exchange because their stock prices rose over 30% from their opening prices. The highest performing stock on the Star Markets debut day was a company making materials for semiconductors called Anji Microelectronics, who saw their stock price increase up to 520% before closing the day at a 400% gain. In contrast, the poorest performing technology company during the debut of the Star market made a gain of 84% for the day.

The Chinese market data provider WInd, released information detailing how the 25 listed technology companies on the Star Market were on average worth 120 times more than their earnings by the end of their first day trading. Official data from the Star Market showed that short-selling transactions accounted for approximately 67% of margin buying during its first trading day. Ronald Wan, the chief executive of Partners Capital in Hong Kong, made the following comments about the gains made by Chinese technology companies during their debut on Star Market by saying "The [surge] is crazy, but it's already over done. I don't think such gains can last long. It's way too speculative".

The Star Market is subject to different regulations compared to the Shanghai and Shenzhen exchanges. During the launch of IPOs on Star Market companies are exempt from first day gains limits placed on IPOs debuting on the Shanghai and Shenzhen exchanges. During a companies IPO all trades are halted for ten minutes if the company experiences gains reaching 30% above or below its opening price, and halted again for 10 minutes if the company reaches a 60% gain or loss. After a companies first 5 trading days their daily price is capped at 20% for both gains and losses. Companies that are unprofitable and/or have unequal voting rights are allows to participate in the Star Market, but are barred from participating in all other Chinese exchanges.