China will relax the conditions for listing on the GEM, and some super-hard companies will benefit

China's relaxation of the GEM listing conditions is part of the Chinese government's grand plan to promote domestic capital markets to better serve the economy.

Since the establishment of the GEM in October 2009, China has also allowed GEM listed companies to refinance for the first time. The purpose of the GEM was to finance technology companies and growth companies.

China is pinning its hopes for a new round of economic growth on innovative technology companies and emerging strategic industries such as alternative energy and biotechnology, as traditional companies such as steel and coal producers have been plagued by overcapacity for many years, and the environment The increase in pollution has also prompted the Chinese government to curb the growth of these industries.

The State Council of China announced on May 9 a series of guiding principles for reforming the domestic financial market. In a general statement full of ambitious goals, the relevant departments promised to build a multi-level capital market system by 2020, promote the development of mixed ownership economy, and reform the listing system. The current regulations are conducive to the approval of large state-owned enterprises through listing, and it is more difficult for small private enterprises to obtain approval for listing applications.

According to the revised Measures for the Administration of Initial Public Offerings and Listing on the Growth Enterprise Market issued by the China Securities Regulatory Commission (CSRC), the CSRC simplified and relaxed the financial access indicators for the listed companies. The requirement for the continued growth of the earnings of the companies listed on the GEM will be lifted.

Previously, for companies wishing to list on the GEM, China had two sets of regulations, one requiring listed applicants to continue to make profits in the past two years, and the accumulated net profit for two years was not less than RMB 10 million, and continued to grow. The other set requires the applicant to make a profit in the most recent year, with a net profit of not less than RMB 5 million and a revenue of not less than RMB 50 million. The growth rate of operating income in the last two years is not less than 30%.

The China Securities Regulatory Commission also canceled the requirement for net profit and continuous growth in the second set of regulations mentioned above, saying that companies with the latest year's profit and income of not less than RMB 50 million can submit a listing application.

In the medium term, Huang Jindong, an analyst at Sinolink Securities, said that the above measures will enable more GEM companies to issue new shares and lower the overvaluation level of listed companies on the GEM, he said, with 12 The expected income level for the month is calculated. The current P/E ratio of listed companies on the GEM is about 50 times.

Last year, the share price of GEM listed companies hit the biggest annual increase since the board was established, mainly because investors are investing in the future growth potential of GEM in the face of slowing demand in the traditional industry. In 2013, the GEM index rose by 83%, while the benchmark Shanghai Composite Index fell by 6.8% over the same period. In the latter index, large-cap stocks such as banks and oil companies accounted for a large weight.