During the morning session of Beijing Stock Exchange’s first trading day, shares of 10 companies that recently conducted initial public offerings all opened higher and surged more than 100%, before triggering circuit breakers.
The performance of the other 71 stocks – which were transferred from the “select tier” of Beijing’s over the counter “New Third Board” – was mixed.
The new exchange, complementing the country’s existing bourses in Shanghai and Shenzhen, will serve small- and medium-sized enterprises (SMEs) with a focus on innovation and are meant to contribute to the high quality growth of China’s economy.
“It’s another landmark in the reform and development of China’s capital market,” Yi Huiman, chairman of the China Securities Regulatory Commission (CSRC), told the opening ceremony of the exchange.
The launch of the Beijing bourse holds significance in enhancing multi-layered capital market, accelerating the improvement of financial support system for SMEs and promoting innovation-driven development and economic transformation and upgrading, according to Yi.
The purpose of the new stock exchange is mainly to support the development of SMEs with a direct financing channel, which could help boost consumption in China because SMEs employ the majority of the workforce in China, Chris Liu, senior portfolio manager of China A-Investments at Invesco, said in a statement.
It should also help reduce Chinese companies’ reliance on bank borrowing and high leverage ratios, Liu added.
The exchange targets smaller companies that are in the early stage of development, and the minimum market cap required is the lowest among the stock exchanges in mainland China.
On July 30, the Chinese Politburo discussed strengthening technological innovation, and developing specialized/new SMEs, which could become “little giants”.
“The Beijing Stock Exchange could be an important cultivation ground for these little giants. The overlap between the existing exchanges is small since these three stock exchanges focus on companies that have different sizes and focus on different areas of industrial value chains,” Liu said.
Brokers should benefit from the initiative most, because the setup of the new stock exchange will boost the trading liquidity of and will encourage more SMEs to get listed in the new stock exchange, he noted.
Over 60 companies in the National Equities Exchange and Quotations “selection tier” may benefit from improved liquidity after they are transferred to the Beijing Stock Exchange, and high-quality companies in the base and innovation tier could also have a chance to transfer in the future, according to Invesco.