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ChiNext, Shenzhen’s Nasdaq, Emerges as Investor Darling as Start-up Indexes Smash Records
🇨🇳 China /Economy & Trade

ChiNext, Shenzhen’s Nasdaq, Emerges as Investor Darling as Start-up Indexes Smash Records

From South China Morning Post · (7m ago) English Positive tone

Translated from English, summarized and contextualized by DistantNews.

TLDR

  • The ChiNext board, Shenzhen's Nasdaq equivalent for startups, has reached record highs following reforms to its listing and trading rules.
  • The ChiNext 50 Index and ChiNext Composite Index surpassed their 2015 peaks, outperforming other Chinese equity gauges.
  • Analysts anticipate these reforms, which include allowing pre-profit tech companies to list and introducing market makers, will boost investor appetite for innovative growth stocks.

Shenzhen's ChiNext board, often likened to the Nasdaq, is experiencing an unprecedented surge, with its key indices smashing records not seen since 2015. This remarkable performance is directly attributable to a comprehensive overhaul of listing and trading regulations implemented earlier this month by the China Securities Regulatory Commission. The reforms are designed to invigorate the market for innovative growth companies, signaling a new era for China's burgeoning tech sector.

The revamped rules are multifaceted, encompassing the crucial allowance for pre-profit technology firms to list on the exchange. This move is particularly significant as it opens doors for many promising startups that previously faced barriers to entry. Furthermore, the introduction of market makers is expected to enhance liquidity and trading activity in the secondary market, making ChiNext stocks more attractive to investors. These changes bring the board's framework in line with the advanced Star Market on the Shanghai Stock Exchange, creating a more competitive and dynamic landscape for tech listings.

This reform is expected to boost the risk appetite for innovative growth companies.

— Xu ChiAn analyst at Zhongtai Securities commented on the expected impact of the regulatory reforms on investor behavior towards growth companies.

Analysts like Xu Chi from Zhongtai Securities believe these reforms will not only boost risk appetite but also lead to a "valuation repair" or re-rating of high-quality growth stocks. The ChiNext board, which began with just 28 companies in 2009, now boasts 1,396 listings with a combined market value of 20.3 trillion yuan (US$2.97 trillion), representing a substantial 42% of the Shenzhen Stock Exchange's total capitalization. Leading the charge are giants like Contemporary Amperex Technology Ltd (CATL), the world's largest EV battery maker, and key players in the AI data center supply chain, Zhongji Innolight and Eoptolink Technology. The ChiNext gauge's 18% rise this year, significantly outpacing the CSI 300 Index, underscores the market's enthusiastic reception to these regulatory advancements.

But the broader implications of this could be a valuation repair [or re-rating] of growth stocks of higher quality.

— Xu ChiThe analyst further elaborated on the potential positive reevaluation of quality growth stocks due to the reforms.
DistantNews Editorial

Originally published by South China Morning Post in English. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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