Original title: Comprehensive registration system reform is in sight, a new era of capital market construction opens Source: 21st Century Business Herald
The steadily advancing registration system reform will bring profound structural changes to the capital market.
On June 13, 2019, a gong sounded by the Huangpu River, announcing the official opening of the Science and Technology Innovation Board, and a “registration system” reform that directly hits the soul of China’s capital market has also begun.
Starting from the “experimental field” of the Science and Technology Innovation Board, the reform of the domestic registration system has made rapid progress in the past two years. In August 2020, the first batch of companies under the GEM registration system were listed; in September 2021, the Beijing Stock Exchange announced the establishment, and the registration system was also implemented. At the Central Economic Work Conference to be held from December 8 to 10, 2021, it further proposed that “the registration system for stock issuance shall be fully implemented.”
The steadily advancing registration system reform will bring profound structural changes to the capital market. Under the registration system, the market-based mechanism has played a greater role, the convenience of stock issuance and listing has improved, the coverage, inclusiveness and attractiveness of the capital market are expected to continue to increase, and the effectiveness of capital market services for technological innovation has also been greatly improved, which strongly promotes finance Capital is turned into investment in science and technology. In addition, while the “registration system” reform optimizes the capital market operating mechanism throughout the entire process and the chain, it has also increased penalties for violations of laws and regulations, unblocked the “export” reform of the delisting system, and strengthened the survival of the fittest.
The market continues to expand, attracting “hard technology” water
During the interview, many investment bankers told the 21st Century Business Herald that under the registration system, only the basic qualifications and compliance conditions necessary for companies to issue shares to the public are retained, and hard conditions such as profitability indicators have been relaxed. The overall listing criteria are also more inclusive. For example, unprofitable companies, companies with red-chip structures and differentiated voting rights can all enter the domestic capital market.
Under the conditions of diversified and inclusive issuance and listing, “hard technology” companies and innovative and entrepreneurial companies have also been given more listing opportunities, bringing more sources of water.
According to Wind data, as of December 27, there were a total of 520 companies IPO in the A-share market in 2021, with a total of 540.1 billion yuan of funds raised. The number of IPOs and the amount of funds raised respectively increased by 18.99% and 12.36% year-on-year, both setting a historical record. new highs.
Specific to each sector, as of December 27, a total of 160 companies will be listed on the Science and Technology Innovation Board in 2021, 15 more than in 2020. In 2020, the number of GEM listed companies implementing the registration system has increased significantly. In 2021, the total number of listed companies has reached 198, an increase of more than 85% over last year.
In terms of sectors, as of December 23, a total of 381 companies have been listed on the Science and Technology Innovation Board, and another 82 companies have been listed on the Beijing Stock Exchange. Compared with the nascent Sci-tech Innovation Board and the Beijing Stock Exchange, the expansion effect brought about by the implementation of the registration system on the ChiNext is more intuitive. Since the implementation of the registration system for more than a year, a total of 258 companies have been listed on the ChiNext, which has been the same as the number of companies listed on the ChiNext under the approval system since 2017. In other words, within the next year and a half of the registration system, the number of listed companies on the ChiNext will be at the same level as the previous three and a half years.
In addition to the continuous expansion of the number of listed companies, the capital market under the registration system has also increasingly demonstrated the characteristics of “hard technology“.
Take the Sci-tech Innovation Board as an example. According to statistics from the Shanghai Stock Exchange, in the first three quarters of this year, the total R&D investment of Sci-Tech Innovation Board companies reached 37.668 billion yuan, a year-on-year increase of 40%. The investment amount is close to the level of 2020. Excluding companies listed on the fifth set of standards, R&D investment accounted for an average of 13% of operating income, ranking first among all A-share sectors. Among them, the R&D investment in integrated circuit, pharmaceutical manufacturing, software and other industries takes the lead. 15 companies such as China Resources Micro, Junshi Biology, etc. 20%.
On the “transcripts” of listed companies, both the Science and Technology Innovation Board and the Growth Enterprise Market gave good answers.
In the first three quarters of this year, the sci-tech innovation board listed companies achieved a total operating income of 483.957 billion yuan, a year-on-year increase of 45.08%; net profit attributable to the parent company was 63.020 billion yuan, a year-on-year increase of 64.01%; net profit deducted from the parent company was 50.796 billion yuan, a year-on-year increase of 39.25% . In terms of operating income, 90% of the companies have achieved revenue growth, and 38 companies have doubled their revenue. In terms of net profit, 70% of companies have achieved growth in net profit attributable to their parent, and 80 companies have increased by more than 100%.
Correspondingly, in the first three quarters of this year, GEM companies also achieved an average operating income of 1.771 billion yuan, a year-on-year increase of 26.02%; an average net profit of 160 million yuan, a year-on-year increase of 10.67%.
Li Zhan, chief economist of the Research Department of China Merchants Fund, believes that the GEM adheres to the “three innovations and four new” positioning, and its distinctive features provide a large number of high-tech enterprises and growth-oriented innovative and entrepreneurial enterprises with financing development opportunities. Among the GEM companies, companies in the next-generation information technology, biomedicine, new materials, and high-end equipment manufacturing industries accounted for nearly 50%, strategic emerging industry companies accounted for nearly 60%, and high-tech companies accounted for more than 90%.
It is foreseeable that the steady advancement of the registration system reform will enhance the coverage, inclusiveness and attractiveness of the capital market, more effectively support the development of the real economy, attract more high-quality companies to be listed in China, and promote the steady improvement of the overall quality of listed companies.
The pace of the issuance of trials has been accelerated, and the pricing has become more market-oriented
While introducing the “living water” from the source, new changes have also taken place in the review of new stock issuance under the registration system.
Liu Shaotong, deputy general manager of the Shanghai Stock Exchange, said that the issuance and listing under the registration system is more predictable, and the review standards, review content, and review process are all open and transparent. In the issuance process, the issuance pricing is more market-oriented. There are no restrictions on the issue price, scale, etc. of new shares, and the price is determined by market supply and demand. In the continuous supervision of listed companies, refinancing, mergers and acquisitions, equity incentives, shareholding reduction, information disclosure, etc., information disclosure is the core, and targeted innovation and exploration are carried out.
Specifically on the issuance side, thanks to the market-oriented underwriting mechanism for IPO issuance under the registration system, the myth of “undefeated IPOs” in the past is being broken under the registration system. The issuance of new shares has seen positive phenomena such as increased breakage and the return of the pricing center. The pricing mechanism of new shares has become more market-oriented, guiding the market to return to the concept of value investment.
In September 2021, the China Securities Regulatory Commission and the Shanghai and Shenzhen Stock Exchanges successively revised the inquiry link in the issuance and underwriting regulations of the Sci-tech Innovation Board and the ChiNext Board. The requirements for postponement of issuance and the strengthening of supervision of price inquiry and quotation activities will promote balanced game between buyers and sellers and increase the level of marketization of issuance pricing.
“Now the difficulty of quoting has increased. It turned out that everyone was very good at guessing. It was nothing more than to report as low as possible in order to guarantee the winning under the background of high price elimination. Now there are many daring to quote high prices, and low-price areas are easy to be eliminated. “A relevant person in charge of a Shanghai public offering fund said that in the absence of references, institutions must rely on their own research capabilities to successfully obtain allocations. “It is not the way of pricing in the past.”
It can be said that through a series of reforms, the China Securities Regulatory Commission is working hard to build a fair market in which issuers, lead underwriters, and investors compete with each other through a new pricing system for new shares.
On the review side, the speed of new stock review under the registration system has also been significantly improved.
The China Securities Regulatory Commission has previously revealed that the review cycle under the registration system has been greatly shortened. Take the Science and Technology Innovation Board and the ChiNext Board as examples, the current average period of review and registration has been reduced to more than 5 months.
The chairman of the China Securities Regulatory Commission, Yi Huiman, once said that the IPO queuing phenomenon generally reflects the dynamism of China’s real economy and the gradual increase in the attractiveness of the capital market. “This is different from the’barrier lake’ in history. In the past, IPOs were stopped and opened, and the expectation was uncertain. Some queues took two or three years; after the reform of the registration system, the registration review cycle has been greatly shortened, and it is close to a mature market. .”
He further stated that to realize the sustainable development of the capital market, it is necessary to fully consider the dynamic and positive balance of investment and financing. Only when the primary and secondary markets are kept orderly and stable, can a good IPO ecology be gradually formed.
In fact, under the influence of the registration system, the review speed of new shares on the Main Board has also been significantly improved.
“At present, the review cycle of the ChiNext Board of the Sci-tech Innovation Board is generally 5-6 months. The supervisory authority has adopted rules to restrict the length of the review cycle of each link, which is very attractive to enterprises. However, in fact, the review of the main board is also regular now. The sci-tech innovation board is still slightly better if you consider the review cycle alone, but with the time to obtain the approval, the listing cycle on the main board and the sci-tech innovation board is the same for companies.” There are domestic small and medium-sized brokers. The person in charge of investment banking said.
The person in charge of the investment bank believes that this year’s Politburo meeting proposed a full implementation of the registration system for stock issuance. Only in terms of the speed of issuance review, the main board market has been in line with the registration system. Prior to the merger of the Shenzhen Stock Exchange main board and the small and medium-sized board also laid the foundation for the full implementation of the registration system for stock issuance.
Strictly control the “entry” and unblock the “exit”
As with the accelerated pace of issuance and review, which has become a distinctive feature of the registration system, there is also the exchange’s strict supervision of companies and intermediaries to be listed.
According to statistics from Ernst & Young, in 2021, A-share IPO audits will continue to be strict, and the number of companies that actively withdraw IPOs has risen sharply. As of December 14, a total of 120 A-share companies withdrew their IPO applications in 2021, compared with only 35 in 2020. In addition, in 2021, the number of companies that failed to pass the review, terminated the review and terminated the registration also reached 50.
According to incomplete statistics from 21st Century Business Herald reporters, as of December 23, 16 securities companies had received a total of 27 fines due to problems in the process of sponsoring IPO projects.
It can be said that the registration system transforms the matters that can be judged by investors under the approval system into more stringent, more comprehensive, in-depth and accurate information disclosure requirements, requiring information disclosure to be true, accurate, and complete, which compacts issuers and intermediaries. responsibility.
In the opinion of brokerage investment bankers, in recent years, especially in 2021, the supervisory authorities are focusing on on-site inspections, on-site supervision, counseling and filing acceptance, etc., to further increase the review of new stocks, and at the same time move the review work forward and strictly Close the IPO entrance.
With the advancement of the registration system reform, the market delisting system has to be gradually improved.
In 2020, the Shanghai and Shenzhen Stock Exchanges completed the revision of the “Stock Listing Rules” to increase the market value index for trading delisting; optimize the financial delisting standards, and strive to clear the shell company, and newly set up “deduction of non-negative + revenue The combination index of “less than 100 million yuan”; the improvement of standard indicators, the addition of detailed indicators for major deficiencies in information disclosure and standardized operations; the improvement of the quantitative standards for major financial frauds in major violations. In terms of optimizing the delisting process and improving the efficiency of delisting, the suspension of listing and resumption of listing are cancelled, the setting of the delisting arrangement period for transactional delisting situations, and the transaction time limit of the delisting arrangement period are shortened to speed up the pace of delisting.
In fact, the reform of the delisting system in 2021 has achieved positive results. As of the third quarter of this year, the Shanghai and Shenzhen stock exchanges have made decisions on the termination of listing of 17 A-share companies, including 2 major illegal delistings, 7 delistings at face value, 6 financial delistings, and 2 other types of delistings. city. In addition, 8 A-share listed companies reorganized and delisted, and 1 voluntarily delisted.
With the continuous advancement of the comprehensive registration system reform, the normalization of the capital market delisting mechanism is accelerating its formation.
Full implementation of issuance registration system is in sight
It can be seen that more than two years after the reform of the pilot registration system in the A-share market, the whole-process and full-chain operation mechanism of my country’s capital market has been continuously optimized, the market-oriented mechanism has played a greater role, the convenience of stock issuance and listing has continued to increase, and information disclosure has improved. The transparency and delisting system has also been improved.
“Through the pilot reforms of the Sci-tech Innovation Board and ChiNext Board and the improvement of the follow-up system in recent years, the conditions for fully implementing the registration system for stock issuance are gradually being met.” Li Jizun, Director of Market I of the China Securities Regulatory Commission, once said at the 2021 Financial Street Forum annual meeting. .
In fact, at the Central Economic Work Conference held from December 8th to 10th, it was clearly proposed that “the registration system for stock issuance shall be fully implemented.” Previously, as the first year of the “14th Five-Year Plan”, the 2021 government work report only stated that the content of the registration system was “steadily advancing the registration system reform.” In the second year of the “14th Five-Year Plan”, the Central Economic Work Conference clearly stated that “the full implementation of the registration system for stock issuance” has also led many market participants to predict that the registration system reform is expected to accelerate.
Chen Li, chief economist of Chuancai Securities, pointed out that the conditions for the implementation of the registration system in my country’s entire market have become mature. From the perspective of economic aggregates, my country’s GDP will grow by 2.3% in 2020, and it will be the only major economy with a positive GDP growth rate in 2020. The economic aggregate will exceed 100 trillion yuan. These basic conditions will lay the foundation for the comprehensive promotion of the registration system. The funding base.
In addition, Liu Shaotong, deputy general manager of the Shanghai Stock Exchange, also said that “increasing the cost of violations of laws and regulations has given the registration system a more sound legal basis and further purified the market ecology.”
In March 2020, the new securities law was formally implemented. While establishing a securities issuance registration system, a securities class action system was introduced, which greatly increased the cost of violations of laws and regulations.
On November 12 this year, the Guangzhou Intermediate People’s Court ruled that Kangmei Pharmaceutical and related responsible persons compensated 52,000 investors with 2.459 billion yuan, marking the successful implementation of the special representative litigation system in my country’s capital market. The case declared that the era of false statements and low illegal costs of fraudulent issuance is gone forever. It has made up for the weakness of the basic system of my country’s securities civil compensation remedy, and formed a three-dimensional system synergy with the administrative and criminal liability mechanisms, which greatly increased the cost of violations, and provided a strong judicial guarantee for the comprehensive implementation of the registration system reform.
It is foreseeable that in the future, guided by the reform of the registration system, the regulatory authorities will further coordinate the promotion of the improvement of the quality of listed companies, improve the delisting mechanism, multi-level market construction, strengthen the responsibility of intermediaries, reform the investment side, and improve the judicial system and mechanism of securities law enforcement, etc. Focus on reforms and continue to improve the basic system of the capital market.
Source: 21st Century Business Herald
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