Caixin
Sep 07, 2021 04:51 AM
FINANCE

Shares Surge on Launch of New Beijing Exchange

The first batch of the New Third Board’s “select tier” companies were listed in July 2020.
The first batch of the New Third Board’s “select tier” companies were listed in July 2020.

Stocks on China’s over-the-counter stock market surged after President Xi Jinping disclosed plans for a new national stock exchange in Beijing to serve as a financing platform for innovative small and midsize enterprises.

All of the 66 “select tier” premium companies on the National Equities Exchange and Quotations Co. Ltd. (NEEQ), owner of the newly established Beijing Stock Exchange, closed up Monday after 90% of them jumped Friday. The total market value of the 66 stocks increased 20% from last Thursday. Trading volume more than quadrupled to 3.8 billion yuan ($597 million).

The 66 “select tier” companies are likely to become the first batch to trade on the Beijing exchange, a source close to regulators told Caixin. The new exchange will become a trading platform for companies in the “select tier,” while those in two other categories will remain in the over-the-counter market, known as the New Third Board, according to the China Securities Regulatory Commission (CSRC).

Shares of cloud test provider Tonghuijiashi Beijing Information Technology Co. Ltd., gravure printing plate manufacturer Beijing Kaiteng Jinggong Gravure Cylinder Co. Ltd., and Hunan Wuxin Tunnel Intelligent Equipment Co. Ltd. jumped 30% Monday, reaching the daily trading limit. Eight stocks rose more than 20%.

The NEEQ, known as the New Third Board, was founded in 2012 to supplement the Shanghai and Shenzhen stock exchanges to serve micro, small and medium-sized companies including startups that don’t meet the standards of the Shanghai and Shenzhen exchanges. The select tier was created in July 2020, comprising high-quality companies that have good profitability or strong innovation capabilities, in a move to revitalize the exchange.

New listings on the Beijing Stock Exchange won’t be subject to any price-change caps on their first trading day. The limit on the second trading day will be 30%, the CSRC said.

Stocks in the NEEQ’s next two categories — the “innovation tier” and the “base tier” — also rose. The total market value of the 1,250 stocks in the innovation tier increased 9% from last Thursday, while that of the 5,983 in the base tier rose 1.3%.

Brokerage stocks on exchanges in Shanghai and Shenzhen were also boosted by the outlook for more business from the new exchange.

Companies can be listed on the new exchange if they have been on the NEEQ’s innovation tier for 12 consecutive months; meet expected market value, financial standards and other conditions; have registered with the CSRC; have completed a public offering to nonspecific qualified investors; and meet requirements for the proportion of public shareholders, according to the CSRC.

The new exchange will help bring incremental business for investment banks and brokerages and is expected to boost the valuation of securities businesses with a focus on serving NEEQ-traded companies, BOC International (China) Co. Ltd. said.

Shares of Shenwan Hongyuan Securities Co. Ltd. (000166.SZ) jumped 10% Monday, the daily price limit. Shares of Citic Construction Investment (601066.SH), Dongwu Securities Co. (601555.SH) and stock information provider East Money Information Co. Ltd. (300059.SZ) surged more than 5%.

The new exchange will also play a role in expanding funding channels for Chinese companies that face growing hurdles to trading in the U.S. amid rising tensions. Regulators from both countries have increased scrutiny of Chinese companies seeking to sell shares in the U.S. after ride-hailing giant Didi Global Inc.’s IPO at the end of June prompted Chinese authorities to launch an investigation into national security risks posed by domestic companies selling stock overseas.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

Download our app to receive breaking news alerts and read the news on the go.

Get our weekly free Must-Read newsletter.

You've accessed an article available only to subscribers
VIEW OPTIONS
Share this article
Open WeChat and scan the QR code