China’s STAR Market Set to Shine with Syngenta IPO

Agricultural giant Syngenta Group Co, an innovator in seed technology and fertilizers, has announced its planned IPO will be worth $10 billion, per the Wall Street Journal

The listing would be the largest offering in the history of the Shanghai Stock Exchange Science and Technology Innovation Board, commonly referred to as the STAR market, and could help the market regain some of the traction it lost when high performer Ant Group’s IPO was cancelled last year. 

Syngenta’s IPO could also be a major boost for the Shanghai STAR market at a time when China is cracking down on overseas investments. 

Syngenta IPO to Make Waves Amidst Crackdown

Created in 2019, the STAR market offers a home to some of the biggest innovators within China’s tech and science sectors. The exchange serves a way to fast-track smaller, private science and tech companies toward IPO, as compared to China’s other markets. 

Syngenta is slightly different than many companies that go the IPO route on the STAR market in that it is a Chinese state-owned enterprise but also a global company. 

The firm’s IPO comes at a time when China has begun restricting overseas stock sales. 

Once it raises funds, Syngenta plans to use roughly one third of the money raised on global acquisitions, and another fifth on developing innovative technology on the forefront of its industry. 

Among other goals, Syngenta aims to increase the amount of arable land in China utilizing seeds and fertilizers that it develops.

Increased regulations have put a damper on the STAR market as it has been forced to pivot away from fintech companies in favor of biotech and semiconductor listings. 

“For domestic fund managers who lack access to the overseas markets, this could be an interesting chance to invest in a company with a global footprint,” said William Yuen, an investment director at Invesco Asset Management based from Hong Kong. 

STAR-Gazing with KSTR

For investors looking to gain exposure to some of the most promising science and tech up-and-comers in China, one ETF option is the KraneShares SSE STAR Market 50 Index ETF (KSTR)

KSTR tracks the Shanghai Stock Exchange (SSE) Science and Technology Innovation Board 50 Index, a benchmark of the 50 largest companies listed on the STAR Market. To be eligible for inclusion in the index, stocks must meet certain market capitalization and liquidity screens, and have been trading for at least 11 days.  

As of the end of June, KSTR was heavily weighted to tech firms, with a 56.82% allocation to information technology stocks, followed by a 20.33% allocation to healthcare firms and 8.86% to industrials. 

KSTR has an operating expense of 0.89%.

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