STAR Market gets boost with 50-stock index

China has stepped up efforts to bolster the development of Shanghai's STAR Market with the planned release of an index tracking the key stocks on the sci-tech board next month, analysts said on Friday.

The Shanghai Stock Exchange said the new index will track the 50 major stocks on the STAR Market, or the science and technology innovation board, from July 23. It will help the investors have a better perception about market performance and offer new investment targets, said an SSE statement.

Analysts said the move represents a major milestone in the STAR Markets development, and signaled that more breakthroughs are on the horizon to refine market rules and boost technological innovation.

Yi Huiman, chairman of the China Securities Regulatory Commission, said the top securities watchdog will step up efforts to make shares of STAR-listed companies available to foreign investors under the stock connect with Hong Kong, and introduce a market making mechanism on the board.

The commission is also planning to roll out regulations on refinancing on the tech board and introduce a fast-track channel for small-amount financing, to facilitate the development of more technology-focused firms, Yi said at the 12th Lujiazui Forum in Shanghai on Thursday.

The Shanghai bourse, meanwhile, will consider launching measures to attract medium to long-term investors on the STAR Market, said Huang Hongyuan, chairman of the board of governors of the SSE.

A list of the institutional investors willing to undertake long-term strategies will be set up so that these institutions can play a bigger role in quotations, pricing and allotment. The structure of the market investors will be thus further optimized, said Huang.

The announcement of new measures came after the anniversary of the STAR Market on June 13. Launched as the test field of the registration-based initial public offering system, the STAR Market was home to 105 listed firms valued at 1.6 trillion yuan ($226 billion) by the end of May, according to the SSE.

With easier standards and streamlined IPO procedures, the STAR Market has buoyed IPO activity on the mainland over the past year and played a key role in sharpening the competitiveness of China's capital market, said a report released on Thursday.

China's capital market was ranked fifth in terms of competitiveness among the 20 major capital markets worldwide, up from the eighth place for the previous year, said the report, co-authored by the Shanghai Advanced Institute of Finance and the SSE's Capital Market Institute.

The report attributed the higher ranking mainly to better market functioning, especially in terms of a surge in IPO activity and an outstanding market uptrend.

The STAR Market saw listings of 70 companies last year, the highest among all A-share submarkets, and contributed 32 percent of the capital raised in the A-share IPOs for the whole year, according to market tracker Wind Info.

The tech-focused board will continue to be a key driver in improving the functioning of China's A-share market, analysts said.

"We expect China's capital market to be strengthened further and become more competitive, considering the reform efforts that are underway," said Han Tan, a market analyst at FXTM, a global foreign exchange broker.

He noted that the country's capital market has remained resilient despite head winds from the COVID-19-related global recession, which has pointed to the overall health and depth of the market.