Summary of Key Points
On its 7th anniversary, the STAR Market has been "upgraded": The fifth set of listing criteria has been expanded to include future industries such as artificial intelligence and quantum technology, allowing more hard-tech companies that are not yet profitable but have potential to go public and raise funds. This is both a positive move for the country's support of its science and technology strategy and presents new opportunities for investment banks. Investment banks must transform from traditional "listing intermediaries" into "industry partners," providing comprehensive services throughout the entire process. Banks like CITIC Construction Investment have already adopted a "four-in-one" approach (research, investment, banking, and advisory services) to address these challenges, including difficulties in valuation and identifying fake technologies. The capital market and new drivers of productivity are mutually reinforcing each other.
1. Expansion of the STAR Market: Green Light for Future Industries
The fifth set of listing criteria was previously limited to certain sectors, but now artificial intelligence, quantum technology, biomanufacturing, and embodied intelligence have been included. This means that companies in these fields can apply to list on the STAR Market even if they are not yet profitable or generate much revenue, as long as their technologies are solid and promising. Why is this important? The country aims to develop new drivers of productivity driven by advanced technologies and models, and these industries require substantial funding for research and development. Listing is the fastest way to obtain such capital. For example, AI companies that invest billions in training large models may not be profitable initially but have great potential; with the STAR Market, they can get the funds needed to continue their efforts, which is beneficial for the national science and technology strategy.
2. Transformation of Investment Banks: From Listing Intermediaries to Industry Partners
In the past, investment banks' roles were relatively straightforward: helping companies prepare documents, navigate reviews, and complete listings, acting more like gatekeepers. However, with the expansion of the STAR Market, investment banks must now have a deep understanding of technology and industry trends. Liu Naisheng emphasizes that investment banks need to evolve from mere intermediaries to true partners, participating actively in companies' growth by researching industry trends, providing funding, and assisting with long-term financing. CITIC Construction Investment has established cross-departmental teams focused on AI and quantum technologies to provide specialized services.
3. CITIC Construction Investment's "Four-in-One" Approach: How to Be a True Industry Partner
To effectively serve as industry partners, CITIC Construction Investment has adopted a strategy called "Three Focuses, One Innovation, and One Integration," which includes the "four-in-one" approach:
- Research: Not just analyzing stocks, but thoroughly studying industries, such as the technical pathways of AI models and the application scenarios of quantum technology.
- Investment: Acting as patient capital, investing in companies to support their growth rather than seeking quick profits.
- Banking: Helping companies navigate the listing process and ensuring a smooth entry into the market.
- Advisory: Sharing opportunities with a wide range of investors, both institutional and individual, by promoting high-quality tech companies.
This integrated approach binds investment banks closely to the companies they serve, benefiting both parties as the companies grow.
4. Opportunities and Challenges for Investment Banks
Opportunities:
- Business Model Transformation: Investment banks can now offer a combined service of research and investment, generating long-term returns through equity investments in listed companies.
- Expanded Scope of Services: Companies may need additional financing, mergers and acquisitions, or even listings overseas, all of which fall within the scope of investment bank services.
- New Opportunities in Debt Financing: There is an increasing variety of debt products, such as science and technology bonds and green bonds, providing investment banks with new opportunities to help companies raise funds.
Challenges:
- Valuation Difficulties: Traditional valuation methods (e.g., price-to-earnings ratios) are ineffective for unprofitable tech companies. Investment banks need to understand the technology to assign fair values.
- Identifying Fake Technologies: Some companies may use AI or quantum claims to deceive investors, and investment banks must be vigilant to avoid regulatory penalties.
- High Pricing Requirements: Since these companies are not profitable, it is challenging to attract investors. Investment banks must clearly communicate the technology's value and find investors willing to invest for the long term, such as pension funds.
5. The Capital Market and New Drivers of Productivity: A Mutual Reinforcing Cycle
The A-share market's tech sector now accounts for 30% of its total value, with 45% of companies having a market capitalization of over 100 billion yuan being technology firms. This indicates that the capital market has become a vital support system for these companies, enabling them to raise funds for research and development more quickly. Conversely, a growing number of high-quality tech companies makes the market more dynamic and attracts more investment. For instance, an AI company that goes public can use the funds to develop better models, leading to increased stock prices and attracting more investors, creating a positive cycle.
In summary, the expansion of the STAR Market is a sign of the country's commitment to supporting technology. Investment banks must adapt to these changes to seize the opportunities. For individual investors, this means access to more quality tech investment opportunities, but they also need to be cautious of fake technologies. Despite the improvements in regulatory oversight, it is still essential to conduct thorough due diligence.