China
China’s new tech board is a rising STAR
Author: Qian Han, Xiamen University
On 13 June 2019, as part of its capital market reform, China officially launched the Science and Technology Innovation Board (STAR). Trading in the STAR market has been quite active since its debut on 22 July 2019. The first batch of 25 stocks listed on the board — mostly from the telecommunication, media and technology sector and equipment manufacturing industries — saw their prices on average more than double with a price-to-earnings (PE) ratio of around 136, compared with the industry average level of just 33. The daily average stock turnover also reached 40 per cent, much higher than that for the Chinese A-share market.
The new board is attracting a lot of investor attention because it is designed to boost the development of China’s sci-tech industry and serve as a test field for future capital market innovations. This dual strategic function is being highlighted amid an ongoing US–China trade war, heightened tensions over Huawei and a recent determination that the Chinese government will gradually open up its domestic financial market to the rest of the world. On 9 August 2019, the 27 STAR-listed companies achieved a total market cap of 660 billion RMB (approximately US$93 billion) and together raised over 37 billion RMB (US$5.2 billion) in net funding from the initial public offering (IPO) after fees and expenses.
The seemingly high PE ratio and turnover could perhaps be explained by the uniqueness of the sci-tech industry. A typical sci-tech start-up company needs years of research and development before it can generate steady income and profits, so investors are encouraged to put more weight on growth potential in valuing STAR stocks instead of the traditional PE valuation model.
On the other hand, statistics from the Shanghai Security Exchange show that on the first day of trading, over 70 per cent of the sell transactions were from institutional investors and over 95 per cent of the buy transactions were from retail investors. This indicates that institutions were eager to pocket early gains, suggesting the possibility of a price reversal in the following trading days. In fact, trading in the third week cooled down — just 3 out of 27 stocks saw their prices rise and on average the market went down by 11.55 per cent.
One of the key innovations of the STAR market is replacing the current approval-based IPO system with a registration-based IPO system. Under this new system, as long as information is guaranteed to be accurate and fully disclosed, the market (rather than the regulatory body) decides whether a firm is capable of issuing stocks and how much a firm is valued.
This holds issuers and investment banks responsible for ensuring the completeness, consistency and validity of the IPO information. On 4 July 2019, the China Securities Regulatory Commission (CSRC) issued a warning letter to China International Capital Corporation, an elite investment bank in China, and put two employees on record for their unauthorised changes of client’s IPO application files.
The STAR board also has the most stringent delisting policies in history. Once a firm meets certain criteria, such as a market cap lower than 300 million RMB (US$41.8 million) for 20 consecutive trading days, it will be immediately delisted. In the main board it is possible for a problem firm to first be suspended, then resume the IPO process after resolving related issues. But firms with severe compliance violations can never be relisted on the STAR board. Regulators hope that these harsh delisting policies will ensure a high quality of listed firms and enhance the efficiency of resource allocation.
STAR market investors also need to get accustomed to a series of new trading rules. Compared with the current 10 per cent price limit for stocks traded on the main board, the STAR market sees no daily price limits imposed in the first five trading days immediately after the IPO, after which it switches to a 20 per cent daily price limit. The wider range of intraday price fluctuations will likely generate higher volatility in the STAR market.
As a countermeasure to curb volatility, the Shanghai Stock Exchange stipulates that when investors place limit orders, the bid price cannot exceed 102 per cent of the base price (usually the best bid) and the ask price cannot be lower than 98 per cent of the base price (usually the best ask). Otherwise these orders are automatically considered invalid. There are also several circuit breakers in place during the trading period to cool down the market.
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Business
Wegovy: The Popular Weight-Loss Drug Now Available in China
Novo Nordisk launched Wegovy in China after approval, competing with Eli Lilly’s upcoming weight-loss drug. The treatment, costing 1,400 yuan, targets obesity but has potential side effects and isn’t covered by healthcare.
Wegovy Launch in China
Novo Nordisk recently launched its weight-loss drug, Wegovy, in China after obtaining approval from local health authorities in June. The introduction of Wegovy is expected to increase competition with Eli Lilly, which has also received approval for its weight-loss treatment, although it has not yet been released in China’s significant pharmaceutical market.
Cost and Accessibility
In China, a set of four Wegovy injections will be priced at 1,400 yuan (approximately $194), significantly lower than the drug’s U.S. price. However, patients will need to pay the full amount out of pocket since Wegovy is not yet covered by the national healthcare insurance plan.
Benefits and Side Effects
Research indicates that Wegovy can help users lose over 10% of their body weight. The drug contains semaglutide, which assists with appetite control and satiety. While Wegovy has been gaining traction globally, it may cause side effects like nausea. Concerns have emerged about its misuse among individuals who are not obese, prompting medical professionals to remain vigilant.
Source : Popular weight-loss drug Wegovy goes on sale in China
China
China Implements New Measures to Increase Foreign Investment in A-Share Market
China’s 2024 updates to strategic investment rules simplify A-share market access for foreign investors by lowering shareholding thresholds, reducing lock-up periods, and increasing investment options, reflecting a commitment to greater market openness and participation in economic reform.
The 2024 updates to China’s strategic investment rules simplify entry for foreign investors in the A-share market by lowering shareholding thresholds, reducing lock-up periods, and expanding investment options, signaling a commitment to increased market openness and flexibility through these new measures.
China’s capital markets are undergoing a significant transformation as part of the nation’s ongoing commitment to economic reform and openness. The recent update to the Administrative Measures for Strategic Investment in Listed Companies by Foreign Investors (hereinafter, the “new measures”) reflects this commitment, targeting an increase in foreign investor participation in China’s A-share market. For nearly two decades, China’s “strategic investment” pathway provided foreign investors with access to shares in A-share listed companies, but strict requirements—such as high minimum investment thresholds and prolonged lock-up periods—made it accessible only to select large investors.
The new measures, effective December 2, 2024, relax many of these restrictions to attract a broader and more diverse range of foreign investors. Key changes include lowering the minimum shareholding threshold from 10 percent to 5 percent, reducing the asset requirements from US$100 million to US$50 million in assets, and shortening the lock-up period from three years to one. Additionally, foreign investors can now use equity from unlisted overseas companies as consideration, while new investment routes, like tender offers, enhance flexibility.
In 2005, China introduced the Strategic Investment Regime as part of its broader efforts to open up its financial markets to foreign capital while retaining a level of control over sensitive industries. This framework allowed qualified foreign investors to acquire strategic stakes in Chinese A-share listed companies, aiming to promote foreign participation in the domestic market.
However, the stringent requirements—such as high minimum investment thresholds and extended lock-up periods—restricted this pathway to a limited pool of large, multinational investors. The regime reflected China’s cautious approach at the time, seeking to balance openness with economic stability and control over critical sectors.
A decade later, in 2015, China implemented its first significant revisions to the Strategic Investment Regime. These amendments sought to make the investment process more accessible by easing certain restrictions, aiming to encourage foreign capital inflow as China continued its gradual integration into global markets.
While some requirements were relaxed, the fundamental limitations—such as high entry thresholds and complex approval processes—remained in place, meaning that access to China’s A-share market was still primarily confined to major institutional investors with substantial capital.
| This article was first published by China Briefing , which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, and India . Readers may write to info@dezshira.com for more support. |
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China
Less is More: Rethinking Indonesia’s Tariffs on China
Rising concerns over China’s industrial overcapacity have led countries to impose higher tariffs, including Indonesia’s planned 200% tariffs on Chinese goods, risking Indonesia’s competitiveness and economic security.
Tariffs Escalate Amid Concerns of Overcapacity
Concerns regarding China’s industrial overcapacity have prompted countries to increase tariffs on Chinese goods. Indonesia, following the U.S. example, plans to impose tariffs as high as 200 percent on various Chinese imports, including textiles and ceramics. This response aims to safeguard local jobs from the influx of inexpensive Chinese products.
Economic Impact of Tariffs
These tariffs are designed as safeguards and anti-dumping measures against potential job losses in Indonesia. However, the ongoing investigations have not definitively shown that China’s practices are the root cause of these issues. The political appeal of broad tariffs might lead to unintended consequences, such as reducing the overall competitiveness of Indonesian exports and risking retaliatory measures from affected countries.
Dependency on Chinese Goods
Indonesia heavily relies on Chinese manufacturing inputs, which constituted over 26 percent of its intermediary goods imports in 2021. With competitive pricing, these inputs have enhanced Indonesia’s export capabilities, particularly to markets like the U.S., where the trade surplus increased from $8.58 billion in 2019 to $11.96 billion in 2023. Reducing trade openness may ultimately undermine the Indonesian economy’s resilience against geopolitical challenges.
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- Less is More: Rethinking Indonesia’s Tariffs on China
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