Chinese equities briefly rose 30% as investors opted for Beijing change

BEIJING – Shares of more than 60 low-priced mainland Chinese stocks briefly rose at least 10% on Monday as investors bet on potential companies to be listed on a new Beijing stock exchange.

Chinese President Xi Jinping announced Thursday afternoon that the capital would launch the country’s third-largest stock exchange to help small and medium-sized businesses raise capital.

These and other privately run companies contribute more than 80% of jobs nationwide, but have had more difficulty than state-owned companies in obtaining funding from banks, the largest of which is state-owned.

The new Beijing Stock Exchange will initially withdraw from shares already traded without a prescription in the “select” section of the “New Third Board,” or National Equities Exchange and Quotations (NEEQ), the securities regulator said Friday.

This set of 66 selective shares rose every Monday afternoon, and nearly a third rose briefly to around 30%. Only five of the companies have market capitalizations of more than $ 1 billion. The daily trading volume per share on Monday stood at millions of yuan, compared to hundreds of millions of yuan of the largest shares traded on the mainland.

Speedbird sheet metal manufacturer, specialized rubber products manufacturer Tongyi Aerospace and packaged food company Zhulaoliu were among the top 10 promoters.

The launch date of the Beijing Stock Exchange has not yet been announced. Authorities will collect public comments on the rules of the new commercial precinct by September 22nd.

Plans for change in Beijing mark the Chinese authorities’ latest attempt to improve the capacity of the local stock market as a financing channel for businesses.

The dominance of sentiment-based retail investors has contributed to a great deal of speculative activity in the continental stock market. It is the second largest in the world, but much younger than in the United States, about three decades old.

The continent’s slow IPO approval system and high profit requirements have led many of China’s largest companies, especially tech giants such as Alibaba and Tencent, to choose to be listed in New York and Hong Kong. However, strict control of Chinese lists in the United States by governments in both countries has essentially stopped the flow of Chinese mutual funds to New York this summer.

In July 2019, China launched the Star Council in Shanghai to test a faster record-based IPO process and higher thresholds for investor access. However, analysts have said the stock market lost momentum at the time of delays in the IPO over the past year.

But authorities have extended some of the practices tested on Star Board, such as large daily ranges of stock trading, to other parts of the continental market.

Analysts expect the Beijing Stock Exchange to only add these improvements to the market.

Cao Yanghui, director of the Nanhua Futures Research Institute, a Hangzhou-based brokerage, said in a statement that the establishment of the Beijing Stock Exchange indicates that changes in the financial market “are advancing at a relatively fast pace. fast “.

“If everyone previously felt that the registration system (IPO) was quite far away, it is possible that it is now close,” Cao said, according to a CNBC translation of his comments in Mandarin.

Although the new stock exchange will initially be extracted from the New Third Board’s selective group of companies, public materials say a record-based trading system will be implemented in the future.

Shares will be allowed to go up or down 30% a day, a relatively wide range for Chinese markets.

“We see the Beijing Exchange positioned to support medium and small businesses and as a hub where the best of these companies can go listed on the Shanghai and Shenzhen stock exchanges,” said Morgan Stanley capital analyst Kiu Liu and a team on September 2nd. note.

They added that “sentiment and short-term liquidity should continue to drive the concentration of brokers.”

The volume of securities trading has increased in the last two months. The 34th consecutive trading day was held on Monday with a volume of more than 1 trillion yuan, according to Wind Information.