Consumer Sector Company A-Share IPO Restart? CSRC Wu Qing's Latest Statement! Multiple Experts' Interpretations

Everyday Economic News Reporter | Wang Lin Everyday Economic News Editor | Du Yu

On March 6, Wu Qing, Chairman of the China Securities Regulatory Commission, stated at the Fourth Session of the 14th National People’s Congress that a more precise and inclusive set of listing standards will be added to the Growth Enterprise Market (GEM). He also emphasized actively supporting high-quality innovative and entrepreneurial enterprises in new consumption, modern service industries, and other sectors to issue and list on the GEM.

A chief analyst in food and beverage at a securities firm told the Daily Economic News that launching this policy during the overlapping window of upgrading the domestic demand strategy, transforming consumption structures, and reforming the capital market reflects a high level of top-level design, addressing economic pain points, market functions, and timing. This is also expected to bring multiple benefits to the secondary market consumer sector.

The reporter noted that after the “August 27 New Policy” in 2023, at least a dozen major consumer companies in clothing, food, housing, and transportation terminated their A-share IPO projects. Many consumer companies chose to list in Hong Kong, with over 30 successfully listed there during the same period. Currently, there are at least 30 more consumer companies waiting in line for IPOs in Hong Kong, with at least 17 companies having submitted applications this year alone. The trend of consumer companies rushing to list in Hong Kong is accelerating.

The news of “actively supporting high-quality innovative and entrepreneurial enterprises in new consumption, modern service industries, etc., to issue and list on the GEM” immediately drew high market attention.

A chief analyst in food and beverage at a securities firm told the Daily Economic News that clearly supporting high-quality innovative and entrepreneurial enterprises in new consumption and modern service industries to list on the GEM aligns with government work reports, sending a positive signal. “Launching this policy during the overlapping window of upgrading the domestic demand strategy, transforming consumption structures, and reforming the capital market reflects a high level of top-level design, addressing economic pain points, market functions, and timing.”

Shen Meng, Executive Director of Sang Sang Capital, also believes that current A-share IPO policies are increasingly favoring support for technology companies, as these are crucial for China’s participation in international strategic competition. However, the structural problems in the economy urgently need to stimulate consumption. If the listing needs of consumer companies cannot be met, it will be difficult to sustain new consumption demand. Therefore, there is consideration of introducing listing standards targeted at consumer enterprises.

It is worth noting that since the launch of the “September 24, 2024” market, the consumer sector represented by food and beverage has been relatively subdued. The market is also paying attention to whether the new IPO policies for new consumption companies can bring a recovery to the secondary market consumer sector.

According to the aforementioned chief analyst, explicitly supporting high-quality innovative and entrepreneurial enterprises in new consumption and modern service industries to list on the GEM will bring multiple benefits to the secondary market consumer sector: first, policy support boosts sentiment, clarifies domestic demand consumption direction, enhances risk appetite, and increases capital attention; second, sector structure upgrades by introducing high-growth new consumption targets, optimizing profit and valuation centers for the GEM consumer sector; third, capital flow tilts by attracting growth funds, driving overall liquidity and valuation recovery in the consumer sector; fourth, structural opportunities concentrate on new retail, local life, digital consumption, modern services, and other new consumption tracks, driven by traditional consumption sentiment; fifth, long-term ecological optimization through listing financing to help enterprises expand, creating a positive cycle of performance and valuation.

However, Shen Meng also believes that the new IPO policies for new consumption and modern service enterprises may intensify market sentiment fluctuations, potentially leading to investment enthusiasm and even valuation bubbles in both the primary and secondary markets for these industries.

After the “August 27 New Policy” in 2023, many large consumer projects in clothing, food, housing, and transportation in the A-share IPO market faced repeated setbacks, including over ten companies such as Lijing Shares, China Tea, Fengdao Food, Jinyuan Seed Industry, Xinjiang Morning Light, Rengyang Yitouniu, Fresh Drinks, Dexin Food, Miss Food, Dongcheng Group, and Baijia A Kuan, terminating their A-share IPOs. This also raised concerns about whether these projects are facing policy restrictions.

Consequently, going public in Hong Kong has become the main choice for large consumer companies in clothing, food, housing, and transportation. After the “August 27 New Policy,” more than 30 consumer companies, including Mixue Group, Laopu Gold, China Resources Beverage, and Mingming Busy, successfully listed in Hong Kong, covering segments such as catering, tea drinks, beverages, agricultural food, and retail.

Looking at the performance of consumer companies listed in Hong Kong, although more than half have seen their stock prices fall below the issue price since listing, there are also highlights. For example, Xipuni, which mainly deals in precious metal watches, rose 258.11% on its first day of listing, while Laopu Gold’s stock price has increased more than 15 times since its IPO.

In the secondary market, driven by strong rises in stocks like Bubble Mart, Mixue Group, and Laopu Gold, the new consumption sector has become one of the most prominent in the Hong Kong stock market.

According to incomplete statistics, at least 30 more companies are waiting in line for IPOs in Hong Kong, including well-known consumer brands such as Yuanji Food, Qian Dama, Junlebao, Nature Hall, Ruyuchen, Laoxiangji, and Banu International. Most of these companies have submitted applications since September last year, with at least 17 companies doing so this year.

In fact, companies like Junlebao, Laoxiangji, and Yunfeng Mogan Mountain had previously attempted to list on the A-shares market but ultimately chose to pursue Hong Kong listings after setbacks.