China Approves First 7 Funds for New Tech Board Investment

The first batch of seven themed funds designed to invest in stocks that will be listed on China's new Nasdaq-style high-tech board were approved Monday.

China’s securities regulator set a high bar for individual investors eligible to directly invest in stocks listed on the relatively riskier new board. Ineligible individuals can buy shares through these funds.

The seven funds were launched by Guangzhou-based E Fund Management Co., Shanghai-based China Universal Asset Management Co. Ltd., Shenzhen-based China Southern Asset Management Co., Beijing-based Harvest Fund Management Co., ICBC Credit Suisse Asset Management Co., Shanghai-based Fullgoal Fund Management Co. and Beijing-based China Asset Management Co., Caixin confirmed with the fund management firms.

While all of the funds have “science and technology innovation” in their names, they are not limited to stocks to be listed on the new board being launched by the Shanghai Securities Exchange. They also can invest in tech stocks on the main boards, the Shenzhen Stock Exchange’s small and medium enterprises board and the ChiNext board of growth enterprises.

Funds with “science and technology innovation” in their names are required to have at least 80% of their assets invested in tech and innovation stocks listed on all boards. Funds with “science and technology innovation board” in their names must invest at least 80% of their assets on the new board, according to China’s fund regulations.

All of the seven funds’ names include only “science and technology innovation” and are not limited to the new board.

The fund managed by ICBC Credit Suisse will be a closed-end strategic equity fund, allowed to participate in companies’ strategic allocations of shares. The six others are open-end funds.

ICBC Credit Suisse has established a team of eight senior analysts to research investment opportunities in the new board, an executive told Caixin.

Since the securities regulator started accepting applications for themed funds designed to invest in the new board listings in February, as of last Friday fund managers have submitted applications for a total of 82 funds. Among them, 36 are solely for investments in the new board, and 46 are funds designed to invest in tech and innovation stocks in general. Twenty-eight are closed-end, and 54 are open-end.

The new board will test a registration-based system for initial public offerings, which would simplify the lengthy approval process that companies must now go through before they can float shares on the mainland market. The new board will allow loss-making companies to raise money publicly and accept companies with weighted voting rights, a dual-class share structure common among tech startups.

Investing in the new board will be riskier because there will be no daily price-movement limits for the first five days of trading in new stocks, compared with the existing 44% limit on new listings on other boards. After the five days, the daily limit will be widened to 20% for the new board from the 10% cap imposed on other boards.

According to rules issued by the China Securities Regulatory Commission, individuals who want to buy stocks listed on the high-tech board must have had a daily average balance of at least 500,000 yuan ($74,500) in their securities accounts. Those who fail to meet the requirement are encouraged to buy new board shares through mutual funds.

Contact editor Han Wei (weihan@caixin.com)