For years, Chinese leaders have been fighting an uphill battle to drive funding for small business. They are counting on Beijing’s first-ever stock exchange to get the job done.
The Beijing Stock Exchange, which launches today, is intended as a platform to house small and medium-sized companies that have long faced difficulty raising capital because they are not large enough to list elsewhere.
About 70 companies are to migrate from an existing Chinese board and an additional 10 are to debut for the first time today.
Photo: Reuters
The bourse, which is to carry just a fraction of the number of companies listed in Shanghai or Shenzhen, is meant to broaden financing channels for firms in hopes of furthering China’s technology ambitions and reduce its reliance on the West.
The move also marks a decades-long effort to make the nation’s financial markets — liable to booms and busts — more multifaceted.
The new stock exchange “could be an important cultivation ground for these little giants,” said Chris Liu (劉徽), a senior portfolio manager for China equities at Invesco Hong Kong Ltd (景順投資管理).
Data analysis firm Shenzhen Suntang High-tech Co (廣道高新技術) and quartz crystal component maker AnHui Jing Sai Technology Co (晶賽科技) are among the 10 companies debuting today, having raised 1.5 billion yuan (US$235 million) from share sales in the run-up.
The other 71 firms are to be transferred from a tier of the National Equities Exchange And Quotations Co (NEEQ, 全國中小企業股份轉讓系統), an over-the-counter marketplace for these smaller companies, according to a report by the state-run China Securities Journal.
Technically, the bourse provides easier access to listings than Shanghai’s NASDAQ-style Star board and the tech-heavy ChiNext in Shenzhen — just 200 million yuan for a minimum market capitalization — and is set to have better liquidity than the NEEQ. Wilder price swings are to be allowed — up to 30 percent either way daily — compared with 20 percent on the other two venues.
“Many companies with great innovative potential may one day list on the Star board, but don’t quite cut it given their early stage — this is meant to give them a chance,” said Fu Lichun, cofounder of Beijing Ytai Capital Co.
To be sure, given the mini-sizes of the companies and their start-up nature, the Beijing exchange is unlikely to make a big splash. More than 300 stocks have listed on Shanghai’s Star board since its 2019 launch.
“We expect the initial trading on the Beijing exchange to have only limited impact on the performance of A shares and its liquidity,” China International Capital Corp (中國國際金融) analysts, including Li Qiusuo (李求索), wrote in a note.
Daily volume is estimated to be between 15 billion yuan and 30 billion yuan, less than 2.7 percent of the total turnover for mainland markets, they said.
China has been promoting equity financing as it seeks to reduce banks’ exposure to credit risks. Meanwhile, it is keen on breeding “specialized, new” companies to break supply chain bottlenecks, according to a statement from a July meeting of top leaders.
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