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China’s Over-the-Counter Market to Launch Five New Indexes Tracking Small Private Firms

By Leng Cheng / Jan 04, 2019 03:33 PM / Finance

China’s largest over-the-counter stock market will launch five new indexes tracking high-quality private firms, aiming to stimulate investor interest in small and midsized companies.

One new index will focus on innovative companies from the board and another on bellwether stocks of private firms. The other three will track manufacturers, service providers and pharmaceutical firms, the National Equities Exchange and Quotations (NEEQ) said.

The five indices will officially launch on Jan.14, the operator said in a statement on Dec. 28.

Founded in 2012, the NEEQ is now home to 10,691 Chinese startups and midsize companies. Also known as the New Third Board, the platform was designed to be a cradle for these companies to grow and then graduate to list on main boards. However, lack of liquidity and poor corporate governance among listed firms has given investors pause.

The NEEQ said brokerages, fund houses and private investment funds can use the newly launched indexes to develop new products, but it is not yet clear whether those indexes will bring in new investment for the board.

Daily turnover of the New Third Board has hovered around 200 to 300 million yuan ($29 million to $44 million) since the start of 2019. Listed companies raised 60.1 billion yuan from the board in 2018, a year-on-year drop of 55%.

Related: China’s Over-the-Counter Market Tries to Stay Relevant

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