China weighs tighter regulations on STAR Board IPOs, fintech curbs

China is considering tighter rules for first-time share sales on Shanghai’s Nasdaq-style STAR board that will require firms to prove their technology credentials and raise the bar for companies such as Ant Group Co.

 

The China Securities Regulatory Commission may introduce revised rules as soon as next month, placing greater emphasis on hardcore technology and innovation, said people familiar with the matter, who asked not to be identified as the discussions are private. There will also be increased scrutiny on financial health to boost the quality of companies and protect investors, they said.

 

While not aimed at any specific sector, the tighter rules would make it harder for financial technology firms such as billionaire Jack Ma’s Ant to list on the venue, as the exchange plans to review their applications more carefully, the people said.

 

Authorities are seeking to tamp down on the bevy of sub-par firms that have rushed to raise funds to take advantage of lax oversight and high valuations, many chasing investor appetite for technology listings. Regulators have also pledged to rein in China’s fintech firms, a move marked by the abrupt suspension of Ant’s $35 billion listing and a flurry of new rules that have been unleashed on the sector.

 

The CSRC didn’t immediately respond to a request seeking a comment. The Shanghai Stock Exchange declined to comment.

 

The new proposal may add further difficulties for Ant to revive its listing plans and weigh on its valuation as regulators sort through details of a fintech industry overhaul. The sector should be developed in a “prudent” manner and China aims to create a “deviation correction” mechanism to fix and suspend innovative financial products as needed, according to the nation’s 14th five-year plan setting policies from 2021 to 2025.

 

With the tighter rules being talked about among mainland bankers, several companies have now been urged to drop their IPO plan from the STAR board, the people said. Some may look to list on Shenzhen’s Chinext board instead.

 

Chinese regulators are walking a fine line in attempts to liberalise its stock market while protecting the interest of retail investors. In November, the Shanghai exchange cited a “significant change” to Ant’s business and earnings model in the wake of changing regulations and the need to protect investors as it put a stop to Ant’s blockbuster listing, upending what would have been the biggest market debut in history.