IPO fever in Beijing with record-high listings in June

The new Beijing Stock Exchange (BSE) recently celebrated a milestone just seven months after its launch: It has already listed more than 100 companies, most of which are small and medium-sized enterprises (SMEs). In June, the BSE accepted a record-high 92 new IPO applications, which will likely result in a new wave of listings.

As of the end of June, the 100 companies listed on the BSE had a total market value of 217.7 billion yuan ($32.5 billion):

• 78% are SMEs involved in industrial materials, IT, medicine and health, “double carbon” projects, and other diversified innovation fields.
• Over 80% are focused on “strategic emerging industries” and advanced manufacturing industries.

Seven IPOs occurred in the month of June alone. Shenzhen Zecheng Electronics 则成电子, for example, began trading on July 6 and issued 17.25 million shares priced at 10.8 yuan ($1.60) per share.

The next wave of IPOs could include a series of “little giant” SMEs in strategic industries, such as Kerun Intelligent Control 科润智控, Huifeng Diamond 惠丰钻石, and Zhuhai Painter Technology 派特尔.

The context

To further promote Xí Jìnpíng’s 习近平 push to nurture and leverage SMEs to advance China’s technological and innovative capabilities, the Supreme People’s Court of the People’s Republic of China on June 23 issued new measures to create a more favorable regulatory environment in capital markets for SMEs.

Beijing is also trying to level the playing field between large conglomerates and SMEs, and to provide more channels for SMEs to raise capital, with the goal of diversifying the sources of technological innovation. As a platform for SMEs to leverage the financial markets, the BSE provides a counter to bank biases toward larger and more financially secure companies, and provides an alternative to listing in overseas markets.

The takeaway

The steady rise of the BSE is indicative of Beijing’s attempts to incubate a vibrant strata of SMEs to revitalize China’s economy and advance technological innovation.

At barely 100 listed companies, however, the BSE is still miniscule relative to the outsized importance of SMEs in the economy. The BSE is also unlikely to be able to match the extravagant capital amounts possible with overseas listings, nor to completely resolve challenges that SMEs face raising capital at home.