Tingshu Wang/Reuters
- The Beijing Stock Exchange complements existing bourses in Shanghai and Shenzhen.
- A total of 81 stocks started trading to mark the official launch of the exchange set up to serve SMEs.
- Trading kicked off on Monday, with shares 10 recently listed companies surging as much as six-fold.
Trading on the Beijing Stock Exchange kicked off on Monday, with shares of the 10 companies that recently conducted initial public offerings (IPOs) on the new Chinese bourse surging as much as six-fold and triggering circuit breakers.
A total of 81 stocks started trading to mark the official launch of the exchange – which has been set up to serve small and medium-sized enterprises (SMEs), underpinning President Xi Jinping’s “common prosperity” policy aimed at reducing wealth gaps in the country.
“It’s a pretty good performance for the first day. I don’t see a lot of froth,” said Yang Hongxun, an analyst at investment consultancy Shenguang. “With President Xi endorsing the exchange, I see little chance of this market failing.”
Performance was mixed for the other 71 stocks, which were transferred to the new bourse from the “select tier” of Beijing’s over-the-counter New Third Board.
The launch of the Beijing exchange is a landmark in China’s capital market reforms, said Yi Huiman, chairman of the China Securities Regulatory Commission (CSRC).
“It’s significant as it will enhance multi-layered capital market, improve financing system for SMEs and drive innovation and upgrade China’s economy,” Yi told a ceremony on Monday.
The Beijing exchange complements existing bourses in Shanghai and Shenzhen that host companies with bigger market capitalizations.
More than 4 million investors have opened accounts to trade on the Beijing Stock Exchange, which adopts a registration-based IPO mechanism – a system also embraced by Shenzhen’s ChiNext and Shanghai’s tech-focused STAR Market.
Circuit breaker
The first batch of companies listed on the bourse are mainly from sectors such as software, pharmaceutical, and high-end manufacturing.
Buying was concentrated in the 10 stocks that were newly approved for listing. The listings for the other stocks were long expected, so had been largely priced in.
Henan Tongxin Transmission Co, which makes automobile transmission devises, was the biggest gainer, surging 504% in morning trade, data from Oriental Securities shows.
Nantong Great Electric Co Ltd nearly quadrupled, while HeBei Raisesun Information Technology Co gained 280%.
The spikes triggered circuit breakers, resulting in temporary halts in the trading of the 10 stocks.
The exchange imposes no limits on the maximum daily movement of these 10 stocks on their first day of trading, but moves will be capped at 30% in either direction afterwards.
Whether the rally can be sustained depends on the fundamentals of the companies, analysts said.
Excluding one loss-making firm, the 81 companies had an average earnings multiple of 36 ahead of their debut, according to official Securities Times.
That compares with price/earning ratios of 71.84 for Shanghai’s STAR Market, and 60 for Shenzhen’s ChinNext.
The median net profit growth of the 81 companies listed on the new exchange is 18.99%, nearly 10 percentage points more than Chinese onshore stocks on average, the newspaper said.
Investors with assets worth at least 500,000 yuan ($78,347) in their stock account can apply to trade in the Beijing Stock Exchange – a threshold on par with Shanghai’s STAR Market.
More cash is expected to flow in.
Eight mutual funds targeting the Beijing exchange have completed registration, according to CSRC.
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