Chinese exchanges say COVID testing firms to face strict IPO checks

SHANGHAI (Reuters) - Chinese stock exchanges said they will strictly vet listing applications from COVID-19 testing companies, in response to media reports voicing concerns over fundraising plans by beneficiaries of the pandemic.

Nucleic acid testing is a key part of China's strict dynamic zero-COVID strategy to identify and control infections, which are rising in major Chinese cities including Beijing and Guangzhou.

Several COVID-testing companies, including Dakewe Biotech Co Ltd, have obtained the regulatory green light recently to sell shares publicly.

That has stirred public discontent on social media towards them, seen as pandemic beneficiaries even as many other businesses suffer.

Questions have also been raised on social and other media on whether some companies' related businesses are sustainable and on whether some deserve to be listed on the technology boards of bourses and thereby enjoy rich valuations.

The Shenzhen Stock Exchange said that it noticed media reports about listing plans by companies such as Dakewe.

"We earnestly reviewed applications from those companies, with a focus on whether the nucleic acid testing business is their core business, and whether related revenues are sustainable," the exchange said in a statement, adding it will strictly control the quality of initial public offerings (IPOs).

The Shanghai Stock Exchange said in separate statement that it too will pay extra attention to listing candidates in the nucleic acid testing business.

"We will stick to strict standards in vetting such applications, and pay special attention to the companies' innovative ability, and business sustainability."

China has seen rising coronavirus infections in major cities including capital Beijing, southern hub Guangzhou, and Zhengzhou in central Henan province.

Shanghai food supplier Pang Pang Xiang (China) Co, which aims for a Hong Kong listing, was criticised on social media last month after disclosing a surge in profit margins during the city's harsh spring lockdown.

Dakewe, which seeks to raise 800 million yuan ($111.84 million) via a listing on Shenzhen's start-up board ChiNext, saw its net profit jump nearly six-fold in 2020 from a year earlier, thanks to COVID, according to its prospectus.

However, Dakewe flagged risks to its virus reagents business, saying that sales could be affected if COVID is brought under control, or product prices fall.

($1 = 7.1533 Chinese yuan renminbi)

(Reporting by Shanghai newsroom; Editing by Tom Hogue and Muralikumar Anantharaman)