New listings surging on Beijing’s first stock exchange

A view of the new Beijing Stock Exchange at the Financial Street, in Beijing, China, November 15, 2021. - Reuters

BEIJING: A cohort of companies making their debut on Beijing’s first-ever stock exchange rallied on the first day of trading and this is welcome news to Chinese leaders who have been fighting an uphill battle to drive funding for small business.

All the 10 companies newly listed on the Beijing Stock Exchange more than doubled yesterday, with auto parts maker Henan Tongxin Transmission Co surging 511% and quartz crystal component maker AnHui Jing Sai Technology Co jumping 255%.

The performance of 71 other companies that migrated from an existing Chinese board was mixed.

The new bourse is intended as a platform to house small and medium-sized enterprises that have long faced difficulty raising capital.

Carrying just a fraction of the number of companies listed in Shanghai or Shenzhen, it is meant to broaden financing channels for firms in hopes of furthering China’s technology ambitions and reduce its reliance on the West.

The move also marks a decades-long effort to make the nation’s financial markets – liable to booms and busts – more multifaceted.

The trading venue “is a new starting point for the exploration of inclusive finance in capital markets with Chinese characteristics,” said Yi Huiman, chairman of the China Securities Regulatory Commission, at its opening ceremony yesterday.

“It has significant implications for promoting innovation and economic upgrade.”

The 10 companies that debuted raised 1.5 billion yuan (US$235mil or RM977.62mil) from share sales in the run-up.

The other firms were transferred from a tier of the National Equities Exchange And Quotations Co (NEEQ), an over-the-counter marketplace for small firms. Among them, Huizhou Huiderui Lithium Battery Technology Co gained 17% while visual solution product provider Tonghuijiashi (Beijing) Information Technology Co fell 11%.

Technically, the bourse provides easier access to listings than Shanghai’s Nasdaq-style Star board and the tech-heavy ChiNext in Shenzhen – just 200 million yuan (RM130.35mil) for a minimum market capitalisation – and is set to have better liquidity than the NEEQ.

Wilder price swings will be allowed – up to 30% either way daily – compared with 20% on the other two venues.

“Many companies with great innovative potential may one day list on the Star board, but don’t quite cut it given their early stage – this is meant to give them a chance,” said Fu Lichun, co-founder of Beijing Ytai Capital Co.

To be sure, given the mini-sizes of the companies and their startup nature, the Beijing exchange is unlikely to make a big splash.

More than 300 stocks have listed on Shanghai’s Star board since its launch in 2019.

“We expect the initial trading on the Beijing exchange to have only limited impact on the performance of A shares and its liquidity,” China International Capital Corporation’s analysts including Li Qiusuo wrote in a recent note.

Daily volume is estimated to be between 15 billion yuan (RM9.78bil) and 30 billion yuan (RM19.55bil), less than 2.7% of the total turnover for mainland markets, they said.

China has been promoting equity financing as it seeks to reduce banks’ exposure to credit risks. Meanwhile, it’s keen on breeding “specialised, new” companies to break supply-chain bottlenecks, according to a statement from a July meeting of top leaders. — Bloomberg

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