The Shenzhen Stock Exchange (SZSE) on April 6 officially merged its Small and Medium Enterprise (SME) Board into the Main Board, as reported by Caixin on the same day. After the merger, SZSE unified the operation rules and regulatory supervision over the two markets, while IPO requirements, investor thresholds, and trading mechanisms remained the same with adaptable adjustments. The stock exchange has switched the securities category of the original SME listed companies to A-shares listed on the Main Board, with the ticker symbols and stock abbreviations unchanged. Correspondingly, it will treat the ongoing IPO applications submitted to the SME Board previously as listing on the Main Board. By retaining the Main Board and ChiNext Board, SZSE’s move could also be regarded as echoing to the Main Board and STAR Market of the Shanghai Stock Exchange (SSE).
Industry experts indicated that the merger of two trading boards in the SZSE would have little impact on the domestic capital market. The Main Board of SZSE ceased its IPO and financing services from 2000 due to the construction of the ChiNext Board. However, after SZSE launched the SME Board in May 2004 for IPOs and financing needs of SMEs and the ChiNext Board in October 2009, its main board was still stagnant. At the end of 2015, SZSE first proposed to resume IPOs on the Main Board. During the IPO stagnation of the Main Board, only seven companies were listed on the Main Board by stock swap. Through the merger with the SME Board, SZSE resumed the functions of the Main Board while keeping the focus on SMEs.
In addition, the listing and regulatory requirements on the Main Board and SME Board were basically the same, so there was no need to distinguish them. For instance, a number of IPOs on the SME Board of SZSE were not small in scale. China General Nuclear Power’s [003816:CH] offering price was RMB2.49 per share and the final issuance scale was 5.05bn shares, raising up to RMB12.57bn, while it still went public on the SME board on August 26, 2019.
This merger aims to clarify the functional positioning of different trading boards and build a multi-level market system in the SZSE. Furthermore, it could also facilitate the comprehensive promotion of the securities registration system reform during the 14th Five-Year Plan (FYP) period. It is expected the main body of the inquiry and deliberation of the registration system will be transferred from CSRC to stock exchanges, meaning there will be no need to make differentiated arrangements or other provisions for the SME Board. According to Sina, there were 461 listed companies on the SZSE main board and 1,002 on the SME Board by April 2, which are all Main Board listed firms after the merger with a total market value of RMB23.5tr.