Exclusive: Shenzhen Bourse Plans to Merge Main Board With Upstart That Supplanted It

It seems a country only needs so many Nasdaq-style stock boards.

China’s securities regulator plans to merge the Shenzhen Stock Exchange’s SME board with its main board, sources with knowledge of the matter told Caixin.

If it goes through, the merger will likely encourage companies to start listing again on the main board, which hosts about one-fifth of Shenzhen-listed companies and hasn’t seen an IPO in two decades.

The Shenzhen Stock Exchange consists of three boards — the main board, the SME board and the ChiNext board. The main board, which dates back to the exchange’s founding in 1990, is home to mainly big blue-chip stocks. The “Nasdaq-style” SME board chiefly serves small and midsize enterprises with growth potential. The “Nasdaq-style” ChiNext focuses on high-tech startups.

It is no longer necessary to distinguish the main board from the SME board because their listing and regulatory requirements are more or less the same, said a source knowledgeable on the matter.

The merger would leave the Shenzhen bourse with the same structure as the Shanghai Stock Exchange, which has a main board and yet another “Nasdaq-style” board dedicated to tech startups, the STAR Market.

The main boards in Shanghai and Shenzhen as well as Shenzhen’s SME board still use the approval-based listing system, while the ChiNext and STAR Market have adopted the new registration-based IPO system which is more market-oriented and involves less red tape.

 Read more 
In Depth: ChiNext Tests Expanding Registration-Based IPOs to Overall Market
In Depth: China’s New Tech Board Takes Off for Long-Term Mission

Shenzhen’s main board has not hosted an IPO since 2000. Late that year, the exchange suspended IPOs on the main board in preparation for the launch of the ChiNext. However, that launch got postponed in the aftermath of the tech bubble bursting in the U.S. Instead, the Shenzhen bourse chose to launch the SME board in 2004 to offer smaller companies a platform to raise funds. The ChiNext wasn’t established until 2009.

The Shenzhen exchange unified the guidelines for listed companies’ operations on the main board and the SME board earlier this year, paving the way for the merger.

As of Tuesday, the Shenzhen Stock Exchange has 469 companies listed on the main board, 982 on the SME board and 868 on the ChiNext. Their market caps are 8.8 trillion yuan ($1.3 trillion), 13.1 trillion yuan and 10.3 trillion yuan, respectively.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

Download our app to receive breaking news alerts and read the news on the go.