Daily Archives: July 10, 2017

New policies set to boost A-share market

An investor checks share prices at a securities brokerage in Jiujiang, Jiangxi province.[HU GUOLIN / FOR CHINA DAILY]Ernst & Young predicts new share offerings in China in 2016 likely to top the 350 markNew policies including the launch of the registration-based initial public offering system will boost IPO activities in the A-share market next year, with the number of IPO deals likely to surpass 350, accounting firm Ernst & Young LLP predicted on Monday.Chinese bourses, both on the mainland and in Hong Kong, led the global IPO market in 2015, with 372 IPOs raising $60.3 billion, according to EY.The A-share market, in particular, saw 219 IPOs, raising 158.6 billion yuan ($24.45 billion). The total value of funds raised in 2015 increased by 102 percent from the level in the previous year.The introduction of the registration-based IPO system will further accelerate the growth of the IPO market next year and will have a comprehensive impact on the Chinese capital market, Terence Ho, head of the strategic growth markets business for China at EY, said at a news conference in Beijing.”The additional influx of new shares may bring down A-share valuations along with lower returns from IPO subscriptions,” he said.In 2015, the average year-to-date gain on IPOs was 473 percent in the A-share market, which compared to 126 percent in Hong Kong and a 1 percent loss in the United States market, according to EY.China’s top legislature on Sunday approved the State Council to launch the much-anticipated registration-based IPO system by March at the earliest.”It means that legal hurdles for introducing the new system have been removed. The new IPO mechanism is now in the process of implementation,” said Li Daxiao, chief economist at Yingda Securities Co.Amid concerns that the new IPO system will dampen demand for existing equities, investors dumped A shares on Monday, with the benchmark Shanghai Composite Index declining 2.59 percent, the biggest loss in a month, to close at 3,533.78 points.Ho said that the restrictions on new share issuance will be lifted step by step in order to avoid a huge supply of new stocks, adding that companies from the industrial, technology, media and telecommunication sectors will continue to dominate IPO activities in the coming year.Meanwhile, the introduction of the new IPO system will make the A-share market a more attractive listing destination, posing a direct challenge to the US and Hong Kong markets, experts said.According to the report from EY, the total number of Chinese companies listed in the US market was eight in 2015, raising a total of $361 million.The number of deals declined by 47 percent while the value of funds raised dropped by 99 percent from the level of the previous year.”Hong Kong will face a substantial challenge in 2017 after the IPOs in the pipeline are listed next year,” Ho said.The Hong Kong Stock Exchange topped the global IPO market in 2015 with 121 IPOs raising a record $33.7 billion. The New York Stock Exchange was ranked second with IPOs raising $19.6 billion, followed by $17.5 billion raised in the Shanghai Stock Exchange, according to EY.

Flaws in all-join-in startups

Zhongguancun Financial Center building in Zhongguancun, regarded as Chinese Silicon Valley, in Beijing.The booming development of the mobile Internet, big data and cloud computing technologies, along with capital and favorable policy support, has offered rare opportunities for starting new businesses. But the encouragement of mass participation, which will result in almost identical business models, as well as the lack of professional managers, poses big potential risks for the all-inclusive business startup model.In the first half of last year, the number of newly established technology businesses in Zhongguancun, a science and high-tech area in Beijing, exceeded 9,000; on average 49 new companies were set up per day.However, the all-encouraging business startup campaign may be incompatible with the fact that entrepreneurship is only demonstrated by a handful of practitioners. Even in the United States, a country widely believed to be rich in entrepreneurship, there are only about 4 to 6 percent of additional entrepreneurs every year. The nature of entrepreneurship decides that the capability to successfully create and operate an innovative business belongs to a few rather than all. Without managerial ability or an entrepreneurial spirit, popular enthusiasm will likely lead to unattainable dreams.The imitation of successful companies by China’s business startups lowers the chance of survival. For example, after the success of Groupon, nearly 6,000 group purchase websites were set up within a short period. But only 3.5 percent of them have survived the fierce competition and few have realized large profits.Participation in a competitive business environment in such a disorderly manner is a recipe for failure for most startups.The odds against success are further lengthened by the lack of skilled professional managers to operate the companies through the minefields of the early days.The above is an abridgement of an Ifeng.com article published on Wednesday.

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