81 companies made their debut on the new Beijing Stock Exchange.
(Photo: Getty Images (M))
Beijing The new stock exchange in Beijing officially started operations on Monday. 81 companies made their debut on the Beijing Stock Exchange (BSE), ten of which were completely re-listed. In total, the companies issued 1.8 billion shares and earned around 18 billion yuan, an average of 220 million yuan per company.
In early November, the China Securities Regulatory Commission, the supreme securities regulator, published the basic business rules for transactions and management of exchange members and the related guidelines for financing, mergers and corporate supervision for the BSE. These came into force on Monday.
Accordingly, only those individual investors who have assets of at least 500,000 yuan (78,134 US dollars) in their personal securities accounts are allowed to trade on the stock exchange. The daily rate fluctuation of the companies listed on the BSE was set at 30 percent. However, there is no upper limit on the first trading day.
That was also evident in the courses that shot up on Monday. The shares of Henan Tongxin Transmission, a company in the automotive industry, rose at times by more than 500 percent, while those of the automotive supplier Nantong Great Electric and the IT company ZCCN INFO rose by almost 300 percent.
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According to its own statements, Beijing wants to develop the exchange into a platform for innovation-oriented small and medium-sized companies. These play a major role in the Chinese economy because, according to official information, they employ around 80 percent of all workers in the People’s Republic. But they have had a hard time getting credit for years. The large state banks prefer to lend their money to large state-owned companies, among other things because they are usually more reliable in repaying their debts.
Companies are to be kept in China
China’s head of state and party leader Xi Jinping announced the establishment of the new exchange at the China International Fair for Trade in Services in early September. “We will continue to support the innovation-driven development of small and medium-sized enterprises by deepening the reform of the New Third Board and establishing a Beijing stock exchange as the main platform for innovation-oriented SMEs,” he said.
According to experts, the new exchange also represents a further attempt to induce Chinese companies to be listed within the borders of the People’s Republic instead of going to foreign exchanges, for example in the USA.
It is not the first time that the Chinese government has been luring domestic companies with a new segment of the stock exchange. Beijing had already launched Chinext in the southern Chinese tech metropolis of Shenzhen in 2009 and the new STAR Market technology exchange in Shanghai in the summer of 2019 with a similar approach to the BSE now.
BSE: Lower hurdles for going public
The main difference between the Beijing Stock Exchange and the STAR Market in Shanghai is the lower requirements for listing, says Viktar Fedaseyeu, finance professor at the China Europe International Business School in Shanghai (CEIBS). That said, smaller and less profitable companies that might not be able to list on other mainland exchanges could now list on the BSE.
The existing stock exchanges in China have very strict listing requirements, making it virtually impossible for small and medium-sized companies to raise capital there, according to Fedaseyeu.
The success of the various stock exchange segments with a view to providing an alternative to marketplaces outside of China has so far been mixed. As in previous years, large Chinese tech companies like Ant or Didi still preferred to go public in the USA. The financial news agency Bloomberg estimates that so far more than 400 Chinese companies have chosen US stock exchanges for their initial listings.
But the conditions for Chinese companies to IPO abroad have tightened significantly. In July, Beijing announced that almost all companies that want to go public in another country would need approval from the cybersecurity regulator – a major hurdle for Chinese companies.
However, experts estimate the likelihood that BSE will be a real alternative to foreign marketplaces in the short term as low. “Since the companies that are eligible for listing on the new BSE are relatively small, it would be difficult for them to raise money on foreign stock exchanges,” says CEIBS finance professor Fedaseyeu.
From this point of view, BSE is not in direct competition with foreign stock exchanges. “In the long term, however, the SMEs listed on the BSE can grow into large companies that could also have listed abroad, but now tend to stay in China,” says Fedaseyeu.
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