At the Booming Beijing Stock Exchange, Big Waves Stir a Small Pond (AI Translation)
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文｜财新周刊 全月 岳跃
By Quan Yueyue, Caixin Weekly
In the recent sharp rise of China's A-share market, the Beijing Stock Exchange has been the most dazzling.
北证50指数在27个交易日内就创出127.21%的涨幅，领涨全市场；北交所个股成为最赚钱的标的。至2024年11月7日，256家北交所上市公司中，75只个股创历史新高，区间涨幅超100%的就多达218家。
The Beijing Stock Exchange 50 Index soared by 127.21% over the course of just 27 trading days, leading the market surge; stocks listed on the Beijing Stock Exchange emerged as the most profitable targets. By November 7, 2024, 75 out of 256 companies listed on the Beijing Stock Exchange had reached record highs, with a staggering 218 stocks experiencing gains of over 100% within the period.
开市交易将满三年的北交所，此前也有两次热潮。开市之初，精选层公司平移至北交所，大量新增资金涌入，加之北交所新股流通盘小、市盈率低，很快被整体拉高；但因整体市场规模较小，上涨昙花一现。2023年9月，《关于高质量建设北京证券交易所的意见》发布，明确北交所投资者准入条件与科创板互认，北交所开户数快速超过600万户，接近科创板开户数的六成；北交所个股因其无融券、无高频量化、无“老庄”等特点吸引大批资金，北证50指数一个月涨幅超过25%，单日成交额也首次突破百亿元。
As the Beijing Stock Exchange approaches its three-year anniversary, it has experienced two notable surges. Initially, when the select tier companies were transferred to the Beijing Stock Exchange, a significant influx of capital was observed. Coupled with the small free-float stocks and low price-to-earnings ratios, this drove an overall rise. However, the rally was short-lived due to the relatively small market size. In September 2023, an opinion on the high-quality development of the Beijing Stock Exchange was released, establishing mutual recognition of investor eligibility criteria with the STAR Market. The number of account openings at the Beijing Stock Exchange quickly surpassed 6 million, reaching about 60% of the STAR Market's total. Due to its characteristics of lacking margin trading, high-frequency trading, and "old-style" stock investors, it attracted substantial capital flows, resulting in a one-month increase of over 25% in the Beijing 50 Index. Additionally, the single-day trading volume surpassed 10 billion yuan for the first time.
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- The Beijing Stock Exchange 50 Index surged 127.21% in 27 days, showcasing significant growth with 218 stocks gaining over 100%.
- Institutional innovations and high market sentiment, alongside specialized "little giant" companies, contributed to the market's appeal.
- Market-making mechanisms aim to improve liquidity, though challenges remain due to limited capital and stringent market conditions.
The recent surge in China's A-share market has been prominently led by the Beijing Stock Exchange (BSE), which has witnessed remarkable gains, especially within the Beijing Stock Exchange 50 Index. Over just 27 trading days, this index soared 127.21%, and by November 7, 2024, 75 out of 256 companies listed on the BSE hit record highs, with 218 stocks gaining over 100%. Triggered by policy measures and increased liquidity, this surge has been unprecedented compared to other A-share indices, which have only risen by 3-4 times during the same period [para. 1][para. 3].
The current growth in BSE is also fueled by the listing of "little giant" companies—specialized, innovative firms that pose both significant investment opportunities and risks. A recent innovation in the BSE listing process allows fast-track reviews for these SMEs, enabling quicker public listing. The BSE is also working on interconnecting its mechanisms with other Chinese exchanges to enhance direct financing for SMEs. Among the listed companies, 95 are categorized as specialized and innovative, experiencing an average market cap of over 2.477 billion yuan [para. 4][para. 5].
A key driver of this boom is the relatively low institutional holdings and early trading volumes. Institutional reluctance to engage deeply in small caps has allowed speculative funds to push up stock prices. For instance, speculative buying activities played a significant role in driving up Airong Software by 940% over 15 trading days, despite its modest financial performance [para. 8][para. 9].
The BSE differs from traditional markets through its market-maker mechanism and adoption of a registration-based IPO system. Although the market-making mechanism has shown limited impact during the recent surge, it aims to increase stock liquidity by allowing institutions to provide bid and ask quotes. However, BSE's market-makers face challenges, including stock acquisition difficulties, due to limited available shares and contrasting valuation perceptions among listed companies [para. 12][para. 13].
With only 5 companies exceeding a market cap of 10 billion yuan and 194 with values under 3 billion, the BSE remains small compared to larger A-share components. The 30% daily cap on stock price increases and decreases attracts short-term speculators. This elasticity allows for potential volatility yet creates opportunities for significant profits, leading to calls for regulatory reforms to align more closely with global markets, which might involve a trial removal of these limits on certain large-cap stocks [para. 16][para. 17].
The potential overhaul of pricing fluctuation limits could include mechanisms like volatility interruptions and varying day-to-day price swing limits. Analysts like Zhang Xiaoyan suggest piloting a lift on daily price limits as an experimental reform towards broader stock market liberalization. Strategic communication and precise regulatory timelines are pivotal in mitigating unnecessary price fluctuations and fostering market efficiency [para. 18][para. 20].
Overall, the BSE’s growth symbolizes both its emerging influence and the challenges it faces in sustaining liquidity and market efficiency amidst growing global competition. The future trajectory will likely depend on ongoing innovations in market mechanisms and regulatory frameworks to maintain the momentum and address underlying risks [para. 21].
- iLend Software
艾融软件 - iLend Software (830799.BJ) is a financial IT solution provider and the first "10-bagger" on the Beijing Stock Exchange, with a 940% increase over 15 trading days after September 24. Although its historical performance isn't impressive, it is involved in popular areas like Huawei's HarmonyOS and AI. The stock's surge is partly attributed to speculative trading, with notable activity from major trading offices.
- Landi Information Technology
联迪信息 - Landi Information Technology (stock code 839790.BJ) is part of the latest surge in the Beijing Stock Exchange, with its stock price increasing by 443.36% during the specified period. It ranks among the top performers in the market. Despite this dramatic rise, the article does not provide detailed information about the company's business operations or financial performance.
- Hualing Corporation
华岭股份 - Hualing Corporation (Ticker: 430139.BJ) is one of the two companies on the Beijing Stock Exchange with a market value over 100 billion yuan. As of November 7, it is among the top-performing stocks with a price increase of over 400%. Hualing is recognized as a "specialized, refined, distinctive, and innovative" enterprise.
- Huaxin Yongdao
华信永道 - Huaxin Yongdao (ticker: 837592.BJ) is one of the top performing stocks on the Beijing Stock Exchange, with a price increase of 422.59% between September 24 and November 7, 2024. It ranks among the top five in terms of percentage gains during this period, although its status as a "specialized, refined, new" enterprise isn't specified in the article.
- Tianma New Materials
天马新材 - Tianma New Materials (stock code 838971.BJ) is one of the companies listed on the Beijing Stock Exchange (BSE) that experienced significant growth during the recent market surge. It ranked among the top-performing stocks, with a price increase of 407.54% between September 24 and November 7, 2024, making it one of the standout performers during this period.
- Aipower
艾能聚 - Aipower, not a "specialized and innovative" enterprise listed on the Beijing Stock Exchange, saw a significant increase in stock value. Starting October 23, it experienced five consecutive limit-up days, with its stock price rising from 8 yuan to 30.78 yuan, reaching a market value exceeding 3 billion yuan.
- Lierda
利尔达 - Lierda, not classified as a "specialized and sophisticated" enterprise, reported a loss of 49 million yuan in the third quarter of 2024, continuing its losses from 2023. Despite the financial difficulties, its stock price saw a significant increase of 266.58% between September 24 and November 6, 2024.
- Ruihua Technology
瑞华技术 - Ruihua Technology (920099.BJ) is a company listed on the Beijing Stock Exchange. It was highlighted for a high dividend yield of over 1% and noted for its lower-than-average market gain of 127.61% from September 24 to November 7, 2024. The article mentions it in the context of discussing high dividend-yield companies.
- AVIC Taida
中航泰达 - AVIC Taida (中航泰达) is mentioned as a company with a cash dividend exceeding 10 million yuan in the third quarter of 2024. During the period from September 24 to November 7, its share price increased by 193.44%.
- Longzhu Technology
龙竹科技 - Longzhu Technology (stock code: 831445.BJ) experienced a price increase of 143.63% during the period from September 24 to November 7, 2024. It is mentioned among companies with significant gains during the recent North Exchange surge, although specific details about its financial performance or other characteristics are not provided in the article.
- Langhong Technology
朗鸿科技 - Langhong Technology (836395.BJ) is a company listed on the Beijing Stock Exchange. Between September 24 and November 7, its stock price increased by 150.59%. In the third quarter of 2024, it had cash dividends exceeding 1 million RMB. The company's dividend yield is over 1%, and its stock performance was below the market average during the specified period.
- Sugon Digital Creation
曙光数创 - Sugon Digital Creation (872808.BJ) is one of the two companies listed on the Beijing Stock Exchange with a market capitalization exceeding 10 billion yuan. It is one of the standout companies in the recent stock surge on the exchange.
- Sinolink Securities
国金证券 - The article mentions Sinolink Securities as one of the market makers on the Beijing Stock Exchange (BSE). Sinolink Securities is involved in market making for nine stocks on the BSE, contributing to enhancing market liquidity and price stability through its market-making activities.
- CITIC Securities
中信证券 - CITIC Securities is involved in the market-making business on the Beijing Stock Exchange (BSE), serving as a market maker for 54 BSE stocks, ranking second in terms of the number of stocks it supports. The article highlights that market-making has a limited impact on smoothing stock prices during the recent BSE surge, partly due to the small scale of operations by market makers like CITIC Securities.
- Galaxy Securities
银河证券 - Galaxy Securities, as mentioned in the article, provides market-making services for 24 stocks on the Beijing Stock Exchange (BSE). This activity forms part of the efforts to improve market liquidity, though the impact of market-making in smoothing price volatility in the recent BSE rally has been limited.
- Industrial Securities
兴业证券 - The article does not mention Industrial Securities. It mainly discusses the recent surge in the Beijing Stock Exchange (BSE), the performance of the North Exchange 50 Index, features of the listed companies, the role of market makers, and the impact of the 30% price limit rule.
- Soochow Securities
东吴证券 - Soochow Securities is mentioned in the context of providing market-making services. As of November 5, they were making markets for 10 stocks on the Beijing Stock Exchange. This involvement highlights their participation in the market, although their scale of market-making is smaller compared to some other securities firms.
- Zheshang Securities
浙商证券 - Zheshang Securities is mentioned as one of the firms participating in market-making on the Beijing Stock Exchange. They are engaged in making a market for 10 stocks. The article notes the differences in the scale of market-making investments among different securities firms, with Zheshang Securities listed alongside others like Dongwu Securities and Caitong Securities, which are also involved in market-making activities.
- Caitong Securities
财通证券 - Caitong Securities is mentioned as one of the securities firms participating as market makers at the Beijing Stock Exchange. However, the article does not provide detailed information about their specific involvement or impact in the recent market activities.
- Guotai Junan Securities
国泰君安 - Guotai Junan Securities is mentioned as one of the firms with the capability to make markets among a limited selection of stocks in the Beijing Stock Exchange. However, they are reported to have only engaged in market-making for 10 stocks, suggesting a relatively modest participation in this specific trading mechanism compared to other securities firms.
- China Securities
中信建投 - The article discusses the recent surge in China's Beijing Stock Exchange (BSE), highlighting a 127.21% increase in the North Exchange 50 Index. This growth was driven by policy support, improved liquidity, and unique market characteristics, attracting substantial investments. The BSE's growth is linked to its focus on specialized, innovative firms, allowing high investment returns but also significant risks. The growth has highlighted the limitations of the market's 30% price fluctuation limit and the impact of market-makers in stabilizing prices.
- Shenwan Hongyuan Securities
申万宏源 - Shenwan Hongyuan Securities, a brokerage firm, offers limited market-making services in Beijing Stock Exchange. As of November 5, it provides market making for 9 stocks. The article suggests that while the company meets high capital standards required for market-making, its actual investments in the Beijing Stock Exchange are modest, with limited stock holdings, making it challenging to influence or stabilize stock prices significantly.
- September 1, 2023：
- Lowered capital threshold for securities companies to become market makers on the Beijing Stock Exchange
- Before September 24, 2023：
- The Beijing Stock Exchange introduced a market-making mechanism to address insufficient market liquidity
- September 2023：
- An opinion on the high-quality development of the Beijing Stock Exchange was released, aligning investor eligibility criteria with the STAR Market
- September 27, 2023：
- The daily transaction value on the Beijing Stock Exchange began fluctuating between 10 billion and 60 billion yuan
- By the End of 2023：
- The Beijing Stock Exchange had 16 market makers, with 198 recorded market-making stocks involving 88 different stocks
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