It's time for the stock market to "return the phoenix back to the nest"

  The A-share market is welcoming the return of red-chip companies with open arms.

Recently, the China Securities Regulatory Commission issued the "Announcement on Expanding the Pilot Scope of Red Chip Enterprises to List in China", further expanding the scope of pilot companies from 7 industries to 14 industries, focusing on high-tech new generations of information technology, new energy, new materials, etc. Industries and strategic emerging industries.

At the same time, it is clarified that red-chip companies with national strategic significance apply to be included in the pilot program and are not subject to the aforementioned industry restrictions.

  Red-chip companies are usually registered overseas and their main business activities are in China. Therefore, their return to the A-share market is like a "phoenix back to the nest".

Regarding the "returning" of red-chip companies, the regulatory authorities have always been welcoming.

As early as 2001, the China Securities Regulatory Commission put the return of red-chip companies on its agenda. However, due to the immature market development at that time, the uncompleted relevant systems, and the differences in domestic and foreign supervision, red-chip companies were not motivated to return and "go home." There are few companies.

  In order to attract red-chip companies to "return to the nest", in recent years, regulatory authorities have frequently released policy warmth and kept clearing institutional obstacles.

In March 2018, the General Office of the State Council forwarded the China Securities Regulatory Commission's notice on several opinions on launching the pilot program of domestic issuance of stocks or depository receipts by innovative enterprises, allowing pilot red-chip companies to issue depositary receipts in the domestic capital market in accordance with procedures.

In April 2020, the China Securities Regulatory Commission issued the "Announcement on the Domestic Listing of Innovative Pilot Red Chip Enterprises". In June of the same year, the Shanghai Stock Exchange issued the "Notice on Issues and Listings of Red Chip Enterprises on the Sci-tech Innovation Board" to open up red chips. The "last mile" of domestic issuance and listing of enterprises.

  With multiple measures taken, the domestic listing framework for red-chip companies has been gradually established, the inclusiveness of the system has been continuously improved, and the threshold for return has been significantly lowered.

Since the pilot, companies such as China Resources Micro, SMIC, No. 9-WD, and Geke Micro have successfully listed on the Science and Technology Innovation Board, and many red-chip companies are queuing for IPOs.

  Why has the regulatory authorities made frequent new actions in recent years and are so committed to "bringing the phoenix back to the nest"?

Standing at a higher starting point of reform and opening up, it is not difficult to explore the deep meaning behind this.

  Red-chip companies "return to the nest" are called by many parties.

Due to historical reasons such as high IPO thresholds and long queues, a group of technology companies that represented the direction of China's economic development went overseas to raise funds, but they missed the booming A-share market.

However, with the rise of trade and investment protectionism in some countries, especially the introduction of the U.S. "Foreign Company Accountability Act" and the cessation of handling Chinese companies’ IPOs in the U.S. policies, overseas regulatory uncertainty has increased, and listing risks have increased. Some companies Hope to return to A shares after delisting, in order to seek a more stable business development environment.

At the same time, domestic investors are also looking forward to the return of red-chip companies. For a long time, local investors have not been able to share the fruits of these companies’ growth. Now that companies “go home” means that they have more opportunities to grow with outstanding companies. Opportunities to obtain a greater return on investment.

  It is time for red-chip companies to "return to the nest".

In recent years, the pace of reform and opening up of my country’s capital market has been accelerating, and looser rules that are conducive to promoting the listing of high-tech enterprises and innovative enterprises have been introduced one after another. The Shanghai-London Stock Connect and ETF interoperability continue to expand, and the infrastructure conditions for docking red-chip companies to go public are already in place.

In addition, the capital market has released an increasingly strong "magnet" effect in opening up. MSCI, FTSE Russell, S&P Dow Jones and other international mainstream indexes have successively included Chinese stocks and bonds into their index system, both domestic and overseas Market connections are getting closer and global capital is accelerating the inflow of A shares, which will undoubtedly provide domestic listed companies with a broader financing space and a steady stream of "running water."

  "Returning to the nest" of red-chip companies can bring multiple wins.

On the one hand, the return of red-chip companies to the local area has made the company's registration and listing places more consistent with the main business locations. Devoting to a more familiar investment and financing environment will help companies develop like fish.

On the other hand, red-chip companies, especially high-tech companies and strategic emerging companies that are in line with national strategies, return to A-shares, which can enrich A-share investment targets, improve the overall quality of listed companies, create a more fully competitive market environment, and make A-shares listed. The company is better able to survive the wind and rain, meet the world, and grow into a more competitive and powerful market entity.

  Of course, it is not a smooth path for red-chip companies to "return to the nest". At present, they are still facing many restrictions such as industry requirements, market value scale, and profit threshold. How to further improve related systems to enhance market inclusiveness and effectively control risks is a test of decision-making wisdom.

But what is clear is that the regulatory authorities have released a firm signal: Bringing good companies back and getting more good companies to go public as soon as possible is an inevitable direction for the reform and development of the capital market in the future.

I believe that as more favorable measures are gradually implemented, the return path becomes clearer and clearer, and the return method becomes more flexible and convenient. In the future, more and more high-quality red-chip companies will be attracted to "return to the nest", injecting sufficient impetus for the high-quality development of my country's economy. .

(This article source: Economic Daily Author: Li Hualin)

Keywords: