Shares Start Trading on the New Beijing Stock Exchange

Trading began Monday on the new Beijing Stock Exchange (BSE), with 81 stocks listed, marking the government’s latest efforts to make more funding available to China’s small and midsize enterprises (SMEs).

The BSE is the Chinese mainland’s third national stock exchange, following the bourses in Shanghai and Shenzhen. Its launch came just two months after President Xi Jinping announced plans to establish an exchange to serve as a major fundraising platform for innovative SMEs.

Of the BSE’s 81 stocks, 71 migrated from the “select tier” of the National Equities Exchange and Quotations (NEEQ), an over-the-counter stock-trading platform, and 10 — which had been traded on the NEEQ’s “innovation tier” — conducted their IPOs right before listing on the BSE. The select tier is purportedly made up of high-quality companies characterized by good profitability or strong innovation capabilities, while the innovation tier hosts well-managed companies that are not good enough to enter the select tier.

Investors piled into the 10 new stocks, with the share price of each more than doubling on the day. Henan Tongxin Transmission Co. Ltd., an auto parts manufacturer, performed the best, closing its debut day nearly 500% above its IPO price. Its peer Nantong Great Electric Co. Ltd. scored the second-biggest gain, leaping 262%.

The 10 stocks were not subject to any cap on price changes on their first trading day, but they will not be allowed to rise or fall by more than 30% in any single day.

The other 71 stocks had a more modest day, as they were subject to the 30% cap. Their best performer, Huizhou Huiderui Lithium Battery Technology Co. Ltd., closed up 18%. The weakest, visual intelligence technology provider Tonghuijiashi (Beijing) Information Technology Co. Ltd., shed 16% from its previous close.

The stark difference in performance between the 10 IPO stocks and the rest could stem from the fact that newly listed companies have long been more attractive targets for speculation in China.

The plan to set up the BSE was announced in September. The Beijing bourse brought in stocks that were part of NEEQ’s select tier. Founded in 2012, the NEEQ is an important fundraising channel for smaller companies in China that don’t meet the listing standards of the Shanghai and Shenzhen exchanges.

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“The establishment of the BSE … is of great significance for further improving the multi-level capital market and speeding up the improvement of the financial support system for small and midsize enterprises,” said Yi Huiman, chairman of the China Securities Regulatory Commission. “It is of great significance to promote innovation-driven development, as well as transformation and upgrading of the economy.”

Contact reporter Tang Ziyi (ziyitang@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

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