“The launch of the new market is a test for risk pricing capability of China’s capital market.” SSE President and CEO Song Lipin made a speech at the 2009 New Market Summit Forum.
Song stated the construction of the new market is significant for China’s capital market. It will be helpful for the boost of technology development and industry upgrade, and the group development of growth enterprises.
With the implementation of Law on Promotion of Small and Medium-sized Enterprises (SMEs) and great attributions made by the government and financial institutions, the trouble in SME financing has been eased. However, China’s equity capital market still develops slowly, and venture capital prefers mature and large-sized enterprises to growth enterprises, which predominantly restricted the SME financing. Song thought the new market is a good solution to above problems. The new market will not only bring equity capital to SMEs, but also drive the development of the PE market, and thus further improve the whole financial system support for SMEs
The risk pricing capability is a great challenge to the performance of the new market. Comparing with the Main Board and the SME Board, the new market will face higher risk. While under the market with higher risk, risk pricing capability is the microcosmic foundation for the achievement of the object.
Only reasonable valuation of growth enterprises can ensure the stable operation of the market and the charm of growth enterprises. One important reason for the successful listing at overseas market of enterprises, such as New Oriental, Baidu, is the risk identification, risk pricing and risk endurance capacity of the mature market itself.
China’s capital market has developed nearly 19 years and attracted over 1500 listed companies. But most of listed companies are the mature enterprises in the traditional industry, which are lack of experience in risk pricing for growth enterprise. After the launch of the new market, group of growth enterprises such as internet companies, which are still strange to the A share market, will participate in the capital market. So how to give pricing to these companies is a big challenge for participants of the market.
Song claim for all market participants to make efforts to promote the development of the new market, and put forwards three requirements, including to adjust supervision concept and system, to call for securities intermediary institutions’ efforts, and to foster more rational investors.