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China launches stock market for small companies

A new Chinese stock exchange meant to nurture small and high-tech enterprises, modeled on the US’ NASDAQ market, started trading yesterday, with the share prices of all 28 listed companies soaring.

Huayi Brothers Media Corp (華誼兄弟傳媒), one of China’s top movie studios, surged 210 percent by midday on the ChiNext exchange in Shenzhen. Other companies rose by at least 119 percent.

The new board is intended to help smaller Chinese companies in a financial system that has long favored big, state-owned companies.

Huayi Brothers and most of the other companies on the new exchange are privately owned, while China’s main exchanges in Shanghai and Shenzhen are dominated by government enterprises.

The communist government has talked for more than a decade about creating a NASDAQ-style market to promote technology and other new industries, but its launch was repeatedly delayed.

Beijing hopes that the new exchange will “channel resources into competitive emerging industries to nurture new economic growth,” China Securities Regulatory Commission Chairman Shang Fulin (尚福林) said last week.

Six firms on ChiNext are in biotech or pharmaceuticals and others are in information technology, energy efficiency, telecoms, medical equipment and electronics.

The exchange “will help to upgrade industries, serving as a window for the world to know more about the Chinese economy,” said Peng Yunliang, an analyst for Shanghai Securities.

The size of share offerings on ChiNext was small compared with the multibillion-dollar initial public offerings on the main boards in Shanghai and Shenzhen, but analysts said investors would welcome the new opportunities.

Some investors worried ahead of ChiNext’s launch that the flood of new shares might depress other stock prices, but the benchmark Shanghai Composite Index was up 2.1 percent at midday.
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