Abstract On the morning of March 8th, an important financial news was screened in the circle of friends: On March 7, at the meeting of the “National People's Congress Chongqing Delegationâ€, Liu Shiyu, chairman of the China Securities Regulatory Commission, exchanged views with the representatives. Huang Yun, a professor at the School of Mechanical Engineering at Chongqing University, said: "From the source...
In the early morning of March 8, an important financial news was screened in a circle of friends: On March 7, at the meeting of the "National People's Congress Chongqing Delegation", Liu Shiyu, chairman of the China Securities Regulatory Commission, exchanged views with the delegates. Huang Yun, a professor at the School of Mechanical Engineering at Chongqing University, said: "From the perspective of the source, I am very much in favor of the new share issuance registration system, but intermediaries such as securities companies and accounting firms should strengthen supervision and implement the post-operation supervision of listed companies. Without this, the IPO registration system is a long road."
Then Huang Yun said that it is possible to promote the IPO registration system in the technology sector, similar to the US Nasnaq, and then more widely promoted, which is also conducive to the normal development of the stock market.
After listening to Liu Shiyu, he immediately responded: "You are a professor of mechanical engineering, but you are so interested in my policy, and made such a good suggestion, how to understand me so."
Above: The Securities Times report on the above news.
This dialogue conveyed an important message to the securities market: it is entirely possible to take the lead in promoting the IPO registration system in the “technology sectorâ€. The reform of the registration system is one of the major reform projects identified in the “Deepening Reform Decision†of the Third Plenary Session of the 18th Central Committee of the Communist Party of China. The essence of this is to return the right to issue shares to the market. If the registration system is implemented, it means that A-shares will become like the US stock market and Hong Kong stock market. As long as companies want to issue stocks, they can issue shares if they have prepared materials and completed the information they should disclose. The issue price, the number of issuances, the amount of financing, and the timing of issuance shall be given to the enterprise itself. The regulatory authorities are mainly supervising after the event and severely penalizing fraud.
Under the registration system, companies often suspend the issuance of new shares, because the price given by the market makes entrepreneurs feel uneconomical. There will also be a large number of IPOs, and new shares will fall below the issue price after listing.
Chinese officials have tried to implement a registration reform in 2015, but everything has been changed because of a “national bull marketâ€. Eventually, the end of the plunge led to an unprecedented rescue, causing currency overshoot and the devaluation of the renminbi for three consecutive days (August 2015). Subsequently, the registration system reform was put on hold for a while, and it was speeded up for a while, and eventually disappeared without a trace in the “Government Work Report†for two consecutive years.
Even the government work report this year did not mention the registration system. It is said that the revision of the Securities Law this year does not involve registration.
However, the people have always believed that with the speed of the IPO, the unregistered registration system reform has started. This Liu Shiyu’s statement seems to confirm this speculation.
The new three board is currently implementing the registration system. Therefore, we have seen that since the market was fully launched in December 2013, it has been listed in more than 10,000 companies in more than three years; and the entire main board and the GEM market have only been listed in more than 3,000 companies for more than 20 years. This shows what the registration system means for the motherboard.
What does “the first implementation of the IPO registration system in the technology sector†mean? In fact, there is no such thing as a “technical sector†in the Shenzhen and Shanghai stock markets. What the representative of Chongqing wants to express may be that innovative companies can be listed on the registration system. Then, whether it is listed on the GEM, the small and medium-sized board, or the newly established special technology sector, the result is the same: the supply of small and medium-sized stocks has increased significantly, which is a major negative for the GEM and small and medium-sized stocks.
At present, the median price-to-earnings ratio of the GEM is 94 times, and the median price-to-earnings ratio of the small and medium-sized board is 72 times. The current state of high foaming is clearly unsustainable. Therefore, as early as December last year, I listed the stocks of the GEM and SMEs as the most dangerous assets in 2017. Although a few of the best companies will grow hundreds of times in the future, most companies have a hard time maintaining their high valuations. For retail investors, the overall risk is huge.
But for technology and innovation companies, for the entity often, the registration system is a major positive. On the one hand, opening up channels for venture capital withdrawal will make it easier for innovative companies to obtain early investment; on the other hand, the expansion of IPO scale will enable innovative companies that have begun to take shape to obtain financing channels for stock issuance. This is actually the "era of stocks" that I mentioned many times before.
From the perspective of the country's overall interests and economic transformation, the registration system reform should be implemented as soon as possible!
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