FACTBOX-Beijing Stock Exchange starts trading

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November 15 (Businesshala) – Trading on China’s Beijing Stock Exchange began here on Monday with 81 companies in the first batch.

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The listing included 71 companies transferred from the ‘select tier’ of Beijing’s over-the-counter New Third Board and 10 companies that recently made initial public offerings (IPOs) on the new exchange.

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Some facts about the new stock exchange are as follows:

Purpose

The Beijing Stock Exchange has been established here to serve small and medium-sized enterprises (SMEs), underpinning President Xi Jinping’s “common prosperity” policy aimed at bridging the wealth gap in the country.

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This comes along with other support measures for SMEs that have historically struggled to obtain financing in China.

China’s securities regulator said the new exchange would complement two other Chinese markets in Shanghai and Shenzhen.

Launching the exchange is also part of China’s efforts to channel more household savings into the stock market for innovation and economic recovery, while reducing the economy’s reliance on bank loans.

History

From announcement to trading, it took two months for the Beijing Stock Exchange, which is the fastest among all exchanges in China.

Most of the stocks traded on the new stock exchange have been transferred from Beijing’s National Equities Exchange and ‘select levels’ of quotations, known as the New Third Board.

The New Third Board, which was set up in 2013, now has a total of 7,033 SMEs. It has three levels – basis, innovation and selection, filtered by quality of firms.

IPO Rules

Compared to other mainland markets, companies wishing to list on the Beijing Stock Exchange are smaller, enjoy lower limits for financial metrics, and shorter approval times.

Currently the average market capitalization of companies listed on the New Third Board’s select level is 3.7 billion yuan ($580 million), roughly one-sixth of those on the main boards of the Shanghai and Shenzhen Exchanges, and much lower than at the beginning of Shenzhen. -Up board ChiNext and Shanghai’s tech-focused Star Market, according to consultancy EY.

The new exchange will host innovation-driven SMEs with the first batch of companies from the industrial, information technology (IT), materials, healthcare and consumer sectors.

The exchange has said that its potential candidates will be companies that have been listed in the ‘Innovation Tier’ of the New Third Board for 12 consecutive months.

Net profit and revenue are not preconditions for IPO. Instead, candidates are allowed to choose from one of four criteria centered around expected market capitalization and financial metrics.

The exchange will employ a registration-based IPO mechanism, which is currently only adopted by Chinanext and StarMarkets.

trading rules

Individual investors eligible to trade on the Beijing Stock Exchange must have assets of at least 500,000 yuan ($78,347) in their stock accounts over 20 trading sessions before applying to trade. They should also have at least 24 months experience in trading securities.

There will be no limit on price changes on the first trading day of new shares, but circuit breakers will be triggered for a stock price increase of more than 30% or a fall of more than 60%.

After the first day, shares will be allowed to rise or fall by 30% each day, versus a 20% cap on the Chinanext and Star Markets, and a 10% cap on the main boards of the Shanghai and Shenzhen exchanges. ($1 = 6.3819 Chinese Yuan) (Reporting by Jason Xue and Andrew Galbraith; Editing by Vidya Ranganathan and Himani Sarkar)

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