China Daily - 22.08.2019

BUSINESS

CHINA DAILY | CHINADAILY.COM.CN/BUSINESSThursday, August 22, 2019

By ZHOU LANXU
[email protected]

Potentially handsome returns
from fast-growing Chinese tech
startups are likely to attract high
foreign participation on Shanghai’s
Nasdaq-like STAR Market, after the
market develops with a larger size
and lower volatility, analysts from
home and abroad said.
China’s sci-tech innovation board,
or the STAR Market, on the Shang-
hai Stock Exchange has received
continuing interest from investors
since it debuted on July 22, with
ample liquidity and relatively strong
stock price performance.
On Wednesday, 22 percent of
the shares of STAR-listed firms
changed hands on average, much
higher than the 2.7 percent for the
whole A-share market. Also, since
the first batch of 25 STAR-listed
firms debuted, their share prices
had gained 6.4 percent on average
as of Wednesday, versus a 1.5 per-
cent loss for the benchmark
Shanghai Composite Index over
the same period.
The STAR Market, however, has
seen limited participation from for-
eign investors, despite their notable
presence on the main board, ana-
lysts said.
Tommie Fang, head of China
equities at UBS, said the majority
of foreign institutional investors
still have a wait-and-see attitude
toward the new board, pending
declines in valuation levels and
steadier market conditions.
At present, foreign investors can
only access STAR-listed firms

through the Qualified Foreign Insti-

tutional Investor program or QFII

and the renminbi-denominated

RQFII — which enable licensed

international institutional investors

to invest in mainland stock

exchanges via quotas, while the

Stock Connect channel is still una-

vailable.

Among the more than 300 for-

eign institutions with QFII licens-

es, only six had subscribed to the

initial public offerings of the 28

firms listed on the STAR Market,

including Goldman Sachs and

Singaporean sovereign wealth

fund GIC Private Ltd, according to

financial information provider

Wind Info.

“The biggest factor limiting for-

eign participation in the STAR

Market is its tiny size,” said Dong

Dengxin, director of Wuhan Uni-

versity of Science and Technolo-

gy’s Finance and Securities

Institute.

The new market, valued at

about 640 billion yuan ($90.7 bil-

lion) in total, may have difficulty

in digesting the funds of foreign

institutional investors typically of

a large amount and in providing a

big enough investment target

pool for them to select, according

to Dong.

“Foreign investors’ interest in the

STAR Market may rise substantially

after the market has more than 100

listed firms,” he said.

Accounting firm PwC estimated

in July that nearly 100 companies

will hopefully get listed on the STAR

Market this year. As of Wednesday,

IPO applications of 118 firms are

under review by the SSE and securi-

ties regulators, or awaiting financial

statement updates to proceed with

the review.

On top of a small market size, the

high valuation — meaning potential

high volatility — of STAR-listed

firms may have also deterred cau-

tious foreign investors that adopt

value investing strategies, analysts

said. Average price-to-earnings

ratio, a typical valuation gauge, of

STAR-listed firms remained as high

as 151 on Wednesday.

But this constraint should weak-

en gradually, according to Lynda

Zhou, equity portfolio manager at

Fidelity International. Near-term

performance may still be volatile,

but STAR’s market-oriented mech-

anisms will help prices to better

reflect fundamentals gradually,

Zhou said.

As the market size enlarges and

early volatility fades, the STAR Mar-

ket has the potential to attract high

foreign participation in the long

run, given the “impressive growth

potential” shown by current STAR-

listed firms, said Matt Weller, global

head of market commentary at Gain

Capital.

“The STAR Market offers the

opportunity for foreign institutional

investors to gain access to early-

stage Chinese firms in the fast-grow-

ing technology and biotech sectors.

Previously, it was nearly impossible

Huawei gets

support from

Japan’s NTT

Docomo

By CHENG YU
[email protected]

NTT Docomo Inc, Japan’s larg-
est telecom carrier by users, is
resuming orders from Huawei
Technologies Co Ltd, as the Chi-
nese telecom giant is securing key
support from the big three tele-
com operators in Japan despite
US restrictions.
As shown on its website on
Wednesday, NTT Docomo restarted
taking orders for Huawei’s high-end
P30 Pro smartphone, which will be
on sale in September.
With the move, the three major
telecom operators in Japan, with
other two being SoftBank Corp and
KDDI Corp, have all restarted sales
of Huawei’s products, after they
delayed the launch in May.
The earlier delay was due to
uncertainty about Google’s previous
announcement that it would restrict
Huawei’s access to updates of the
Android operating system in com-
pliance with a US ban.
“We had been examining the
impact of US trade restrictions on
Huawei but have confirmed that our
customers can safely use Huawei
products at this stage,” an NTT Doco-
mo spokesman said on Tuesday.
In Japan, Huawei ranked fifth in
terms of smartphone shipments
and accounted for 6.2 percent of the
total by the first quarter of this year,
following Apple Inc, Sharp Corp,
Sony Mobile Communications Inc
and Samsung Electronics Co.
Xiang Ligang, director-general of
telecom industry association Infor-
mation Consumption Alliance, said:
“The move is of significance, show-
ing that the Japanese tech company
is not willing to surrender to politi-
cal pressure from Washington,
which leveraged political power to
suppress tech power globally.”
Washington at first put Huawei
on the Entity List in May, banning it
from buying US technology without
special government approval. Later,
the US government gave Huawei a
temporary license to purchase some
US-made goods to reduce disrup-
tion for its customers.
The US government said on Mon-

day that it will give Huawei another

90 days to buy from US suppliers.

The move, an extension of the

license through mid-November, is

expected to allow the Chinese tech

giant to serve its existing telecom

customers and smartphone users.

Analysts pointed out the latest

development also reflected a

broader trend where companies

globally all started to realize that

any behavior obstructing fair and

free trade will hurt their interests

in the end.

Reuters reported that US Presi-

dent Donald Trump said on Sunday

that he had spoken with Apple CEO

Tim Cook, where Cook “made a good

case” that tariffs could hurt Apple.

Cook reportedly said that it

would be hard for Apple to pay

tariffs on its products assembled

in China, as many of its competi-

tors, such as Samsung, whose

manufacturing is mostly located

in South Korea, do not have to pay

the same level of tariffs.

More steps planned

to ease investment

hurdles, say officials

By ZHONG NAN

[email protected]

The government will hold three

closed-door meetings regarding

the implementation of the Foreign

Investment Law, customs clear-

ance facilitation and the protec-

tion of intellectual property

during the multinational leader’s

summit in Qingdao, Shandong

province, in October, senior offi-

cials said on Wednesday.

These meetings will be hosted

by the Ministry of Commerce, the

General Administration of Cus-

toms and China National Intellec-

tual Property Administration from

Oct 19 to 20.

These government branches

will announce new policies and

collect opinion from participating

companies during the meetings,

said Qian Keming, vice-minister of

commerce.

The Ministry of Commerce is

overhauling existing laws and regu-

lations, and amending laws that are

inconsistent with foreign invest-

ment regulations to ensure that the

Foreign Investment Law can be

smoothly implemented on Jan 1,

2020, so as to make the investment

environment in the country more

healthy and friendly, said Qian.

The vice-minister said China

will continue to facilitate foreign

investment and trade while stimu-

lating consumption amid a com-

plicated and slowing global

economy.

A total of 188 senior executives

from Fortune 500 companies and

top industrial groups, such as BP

Plc, Siemens AG, HP Inc and

Sumitomo Corp, from 26 coun-

tries and regions have confirmed

to their attendance the upcoming

summit in Qingdao, said Ren

Airong, vice-governor of Shand-

ong province.

She said the summit this year

will focus on developing business-

es such as next-generation infor-

mation technology, high-end

manufacturing, new energy and

new materials, marine economy,

healthcare, customized tourism,

modern finance and agriculture.

Despite the Sino-US trade fric-

tion, China has attracted a great

deal of foreign direct investment

from diversified sources in the first

seven months of this year, laying a

solid footing for the second half,

said Li Yong, deputy director of the

China Association of International

Trade Expert Committee.

FDI inflows to the Chinese

mainland rose 7.3 percent year-on-

year to 533.14 billion yuan ($75.

billion) between January and July

this year, responding positively to

the government’s opening-up and

liberalizing measures, data from

the Ministry of Commerce show.

“Multinationals’ confidence has

also been boosted by the establish-

ment of more intellectual property

rights courts at central and provin-

cial levels starting this year,” Li

said. “As China has hastened the

development of an innovation-

driven economy, it has been keen

to enhance the legal regime for IP

protection, and new protection

mechanisms have already taken

shape across the country.”

Eager to enrich its ability of

attracting FDI, China rolled out

revised negative lists for foreign

investment market access at the

end of June, introducing greater

opening-up and allowing foreign

investors to run majority-share-

control or wholly-owned business-

es in more sectors.

Huawei Technologies Co introduces the new P30 smartphone series in Tokyo earlier this year. PROVIDED

TO CHINA DAILY

Londoners can now access ultrafast

5G broadband internet in their homes

through routers made by Chinese tele-

communications company Huawei, aft-

er a major network upgrade from

mobile operator Three.

Following the launch of Three’s 5G

home broadband in parts of the British

capital, users can reap the benefits of the

latest generation of network technology

via the Huawei 5G CPE Pro Router.

There is no need for a landline to

operate the router — residents simply

need to connect the device to a power

source and insert a micro SIM card.

“Three’s 5G is going to revolutionize

the home broadband experience,” said

Dave Dyson, chief executive of Three.

“No more paying for landline rental, no

more waiting for engineers, and even a

same-day delivery option. It really is

the straightforward plug and play

broadband that customers have been

waiting for. The ease and immediacy of

it all means home broadband using 5G

is going to be key to the future of the

connected home.”

The service is available in the London

boroughs of Camden and Southwark.

Hackney, Islington and Tower Hamlets

will follow in the next few weeks.

Vodafone and EE have also com-

menced 5G rollouts in the United King-

dom, and Britain’s fourth major mobile

operator, O2, will launch 5G upgrades

from October.

Three, Vodafone, and EE will use

Huawei equipment in their radio access

networks for 5G upgrades, even though

Huawei kit could soon be banned from

network infrastructure, if the UK gov-

ernment joins a US-led boycott of the

Chinese company. O2 is working with

Ericsson and Nokia as technology part-

ners for its 5G rollout.

The United States has pressured the

UK to ban Huawei participation in 5G

upgrades, due to what the US claims

are security concerns. The UK govern-

ment was expected to reach a determi-

nation on whether it would join the

Huawei boycott last month but the

Conservative Party leadership contest

delayed the decision.

On Friday, Huawei founder Ren

Zhengfei said he was confident that the

UK would allow the continued use of

his company’s technology in network

upgrades.

“I noticed the third day that (John-

son) was in office, he said the UK

should roll out 5G as soon as possible,”

Ren told Sky News. “I think they won’t

say no to us as long as they go through

those rigorous tests and look at it in a

serious manner and I think if they do

say no, it won’t be to us.”

Upcoming releases of Huawei 5G

smartphones by UK vendors have

already been impacted by a US ruling

that prevents Huawei devices from

accessing updates on the Android

operating system.

Angus McNeice in London

Network gear of Chinese company brings 5G services to London homes

STAR Market set to attract global attention

But biggest factor currently limiting

foreign participation is its tiny size

business models unique across the

globe will be the ultimate attraction

of the STAR Market to overseas

investors,” Wang said.

Such companies are expected to

emerge on the board as market

size gets bigger, given China’s

merit of being an ideal testing

ground for new business models

and the STAR Market’s fundamen-

tal market reforms, Wang said,

adding that the STAR Market may

have the highest foreign participa-

tion in all A-share sectors in the

future.

Another push for foreign inves-

tors to buy into STAR’s opportuni-

ties should be international equity

indices’ incorporation of STAR-list-

ed firms after the market matures,

said Wang Haoyu, managing direct-

or and head of capital markets of

Beijing-based CreditEase Wealth

Management.

While the SSE has announced to

include the STAR Market into the

benchmark SCI on Jan 22 next

year, most index compilers may

still mull their decisions over the

new board, according to him.

Global index compiler MSCI

Inc told China Daily it will “con-

tinue to monitor and provide fur-

ther communication on the

eligibility of the STAR Market pri-

or to the November 2019 Semi-

Annual Index Review”.

Analysts said MSCI’s inclusion of

STAR-listed firms may come only

after they become eligible on the

Shanghai-Hong Kong Stock Con-

nect. This is in turn partially

dependent on the inclusion of the

firms, if without shares listed in

Hong Kong, into the SSE 180 Index

or SSE 380 Index, which may take

place by the end of this year at the

earliest.

An attendee takes a snapshot at the launch ceremony of the STAR

Market in Shanghai. WU JUN / FOR CHINA DAILY

for foreign investors to purchase

shares in such companies,” Weller

said.

Such almost unprecedented

investment opportunities are ena-

bled by STAR’s registration-based

IPO reforms, with easier IPO stan-

dards for tech startups, according to

analysts.

President Xi Jinping announced

in November that China would

launch the new board and pilot

the registration-based IPO sys-

tem. The latest tone-setting meet-

ing of the country’s leadership

held in July required the STAR

Market to properly implement its

registration-based IPO system

with information disclosure at its

core and improve the quality of

listed firms.

For the STAR Market to really

draw foreign investors’ interest and

even receive their stand-alone allo-

cation, the quality of listed firms

should be the top determinant, said

Wang Maobin, investment depart-

ment chair at the University of

International Business and Eco-

nomics in Beijing.

“Listed firms with innovative

Foreign investors’

interest in the STAR

Market may rise

substantially after

the market has more

than 100 listed firms.”

Dong Dengxin, director of

Wuhan University of Science

and Technology’s Finance and

Securities Institute

Multinationals’

confidence has also

been boosted by the

establishment of

more intellectual

property rights

courts at central and

provincial levels

starting this year.”

Li Yong, deputy director of the

China Association of Interna-

tional Trade Expert Committee