Overview of the Refinancing Market of SZSE in 2019

Date: 2020-02-04

Refinancing of listed companies is an important function of the capital market. In 2019, facing changes in domestic and overseas economic situations, SZSE-listed companies focused on main business, explored opportunities in various aspects and flexibly used the refinancing toolkit. They implemented and completed 106 refinancing transactions, which raised CNY116.2 billion. The active refinancing market has effectively promoted the technological innovation and industrial transformation and upgrading of enterprises and enhanced market vitality and resilience, further improving the quality and efficiency of serving the real economy.


In 2019, the SZSE refinancing market gained a new feature, that is, convertible bonds replaced private placement as the featured variety. According to statistics, in 2019 SZSE-listed companies implemented and completed 106 refinancing transactions including convertible bonds, private placement and rights issue, which raised funds of CNY116.2 billion, higher than the CNY64.6 billion raised through IPO in the corresponding period. There were 63 convertible bond issues, which raised CNY76.8 billion, up 1 time and 1.5 times respectively from 2018. Both the quantity and scale of issuance reached a record high. There were 36 private placements, which raised CNY32.2 billion, down by 28% and 59% from 2018 respectively. Moreover, in 2019 SZSE completed 4 rights issue transactions, 2 directional convertible bond transactions and 1 public follow-on issue, which raised a total of CNY7.2 billion.


Refinancing instruments are more diversified. In 2019 SZSE-listed companies' refinancing methods were blossoming in various aspects. Convertible bonds grew rapidly. Directional convertible bonds were issued. Ppublic follow-on issue returned, and rights issue and preferred stocks maintained momentum. First, convertible bonds became the main force in the refinancing market, which raised funds twice those through private placement. Second, King-Strong Directional Convertible Bond and Huming Directional Convertible Bond were successfully issued, marking the official landing of innovative directional convertible bond products in the A-share market. Some 20 companies including CCHN (000661) and LKDF (002413) followed suit, making directional convertible bonds a new highlight in the refinancing market in 2019. Third, TOPSTAR (300607) completed the first public follow-on issue on the ChiNext Board and raised CNY800 million, filling in the blank of nearly 5 years in the A-share public follow-on issue market. Later, Bossco (300422) obtained the approval of China Securities Regulatory Commission (CSRC) for its public offering plan. Fourth, the issuing scale of rights issue and preferred stocks grew significantly. In 2019 SZSE-listed companies completed 4 rights issue transactions, with an average financing amount per company of CNY1.6 billion, twice that in 2018. THST (300197) and MCST (300355) completed their preferred stock offerings in 2019.


The issuance is more convenient and the market more active. In 2019 refinancing review efficiency continued to improve and the average review cycle was clearly reduced, further facilitating listed companies' refinancing. The average review time of private placement reduced from 327 days in 2018 to about 240 days in 2019. Eve (300014) obtained the approval for its private placement plan in less than 60 days, and it took Anzhongding (000887) less than 80 days from submitting an application to obtaining the approval for convertible bond issue. On the other hand, refinancing subscription picked up. The convertible bond variety was especially popular among investors. In 2019 the average online lot wining rate of convertible bonds fell to 0.042%, while the issuance success rates of SZSE convertible bonds, rights issue, preferred stocks and public follow-on offering were all 100% and that of private placement was 95%.


The purposes of fund use are more focused. In 2019 ninety percent of the issuing entities of refinancing on SZSE were high-tech enterprises, and eighty percent of the funds they raised were invested in their main business, assisting in their transformation and upgrading. iFLYTEK (002230) raised CNY2.927 billion and mainly used it in the R&D of new-generation core sensing and cognitive technologies. Naura (002371) raised CNY2 billion and mainly used it in high-end integrated circuit equipment R&D and industrialization projects. Zhongji Innolight (300308) raised CNY1.556 billion and mainly used it in its 400G photo-communication module R&D and manufacturing project.


The results of serving private companies are more remarkable. In 2019, 85 SZSE-listed private companies successfully completed refinancing and raised CNY70.7 billion, which, to some extent, relieved the difficulties faced by private companies in access financing. 33 of those private companies raised CNY29.5 billion through equity financing, from which their asset-liability ratio decreased by 7 percentage points in average and their asset structure improved. 52 private companies raised CNY41.2 billion, and their first-year average coupon rate was only 0.44%. Those funds are expected to save financing expenses by CNY1.6 billion in 2020, easing their financial burdens significantly.


In November 2019, CSRC released the exposure draft for refinancing rules and further improved basic systems, optimized procedures and mechanisms and stimulated market vitality. This has provided more convenient and smoother refinancing channels for listed companies. Next, SZSE will faithfully follow the overall arrangement of CSRC to deepen the reform of the capital market on all sides, focus on advancing the action plan on improving the quality of listed companies, actively promote and implement the reform of the refinancing system, revise and improve supporting rules and guides. All these are aimed to effectively enhance direct financing capability, give full play to the resource allocation function of SZSE as a multi-tiered capital market, give all-round support to listed companies in using the capital market to become better and stronger, and better serve high-quality economic development.

Next, SZSE will faithfully follow the overall arrangement of CSRC to deepen the reform of the capital market on all sides, focus on advancing the action plan on improving the quality of listed companies, actively promote and implement the reform of the refinancing system, revise and improve supporting rules and guides.