Shanghai Stock Exchange's proposed innovation-based trading platform gets applications from 9 companies

The science and technology innovation board at the Shanghai Stock Exchange is making steady progress as the bourse announced on Friday the list of the first nine companies that have submitted all the necessary application documents.

Available information shows that three of the nine companies specialize in the latest information technologies, two are high-end equipment manufacturers, two biomedicine companies, one new material maker and one new energy service provider. The average market value of the nine companies is estimated at around 7.28 billion yuan ($1.08 billion).

The average turnover of the nine companies for the past fiscal year came in at 1.03 billion yuan. The investment in research and development took up 5 to 20 percent of the companies' total income on average.

Eight of the nine companies posted profits for the latest fiscal year. Chipmaker HeJian Technology (Suzhou) Co Ltd is the only company that reported a loss of 2.6 billion yuan in the period. But the company said in the prospectus that it is common for chipmakers to report loss in their early years due to the huge preliminary investment and the shorter equipment amortization period. It also stressed that the company has maintained positive cash flows for three consecutive years since 2016.

Yang Delong, chief economist at Shenzhen-based First Seafront Fund, said that the first nine applicants for the new board are all from industries in line with China's strategic development, indicating the country's increased support for technology innovation companies. Investors will thus show more interest for tech companies of the A-share market, he said.

Late Sunday night, the SSE released a detailed guideline for initial public offerings on the new tech board, which requires issuers to clean up their value adjustment agreement before making applications.

Fang Xinghai, deputy head of the China Securities Regulatory Commission, said earlier this month that the SSE will complete the application vetting process in less than six months and the CSRC will finish the same process in 20 working days.

Fu Lichun, research director of Northeast Securities, said that the first batch of companies are likely to be listed on the new tech board in the middle of the year.

President Xi Jinping announced in early November that China would launch a science and technology innovation board at SSE and pilot a registration system for listed companies.

Preparatory work has been going on in full swing. The CSRC released nine consultation papers at the end of January and issued the official documents on March 2, which was right after the consultation period ended.

Regulations for the new board were released on March 1 and took effect immediately. One of the biggest breakthroughs is that companies that have not reported profit yet are eligible for the new board as long as they meet one of the five sets of financial indicators. On March 13, sponsors took part in a test run of the new board's audit system.

But analysts from China International Capital Corp pointed out that although the nine companies' applications are now in process, it does not necessarily mean that they will be the first ones to be listed on the new tech board. They have to go through the necessary inquiry and further examinations by the bourse and also obtain approval from the market regulator. The recently released prospectus is also not final, indicating that information disclosed so far - such as market value and planned financing - may be adjusted in the future.