Steps boosting STAR Market sentiment

Thanks to recently introduced supportive policies, restructuring as well as merger and acquisition activities are likely to pick up in the STAR Market on the Shanghai Stock Exchange, which will in turn elevate risk appetite and improve performance of the board to nurture "hard technologies" such as integrated circuits, said experts and industry mavens.

They made the comments after the SSE on Friday held a special training program for nearly 50 STAR Market-listed IC companies to explain the eight new policies released by the China Securities Regulatory Commission on June 19.

The new policies, which are projected to complete the basic mechanism for the STAR Market, said that companies trading on the board will be supported to acquire quality "hard technology" companies that have not generated profits yet.

According to IC company executives present at the SSE training program, some quality firms in the sector report losses mainly because of the industrial cycle or continued investment in research and development.

A green channel for the revision of such restructuring, as well as supportive financing measures to make M&As possible, are suggested by the program participants.

The management team from IC design company Shanghai Awinic Technology, who also attended the Friday program, said that the new measures will help IC companies to strengthen their prime operations via M&As while eliminating less competitive peers.

Executives from VeriSilicon Microelectronics (Shanghai) Co Ltd suggested that the revision process and financing standards regarding acquisition via stock issuances should be more flexible. M&A payment tools can also be enriched, they said.

Wang Yi, chief strategist of Huatai Securities, said that M&A and restructuring activities will be more active amid the recently introduced policies. As a result, the profitability outlook of A-share growth enterprises represented by STAR Market-listed companies will improve. Investor risk appetite for these companies will also pick up.

The CSRC already expressed support for M&As at the STAR Market and ChiNext at the Shenzhen bourse during a forum in early February, said Yang Fan, CITIC Securities' chief macro and policy analyst.

According to the eight new measures, installment payments may be introduced for M&As, making transactions easier, said Yang.

Liu Chenming, chief strategist at GF Securities, has been explaining investment opportunities on the STAR Market for over four consecutive weeks since mid-May.

While marginal fundamental improvements of these companies are the core reason, supportive government policies are the trigger, Liu said.

"This will be a long-awaited and noteworthy opportunity, which is being gradually realized now," he added.

Chen Gang, Soochow Securities' chief strategist, believes that tech companies will show stronger performance in the second half, partly thanks to the number of supportive policies. Semiconductor and low-altitude economy firms are worth looking at, he said.