Trading kicks off on Beijing Stock Exchange, 10 stocks surge

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SHANGHAI (Businesshala) – Trading on the Beijing Stock Exchange began on Monday, with shares of 10 companies that recently conducted an initial public offering (IPO) on the new Chinese exchange soared up to six times and triggered circuit breakers.

A view of the new Beijing Stock Exchange on Financial Street in Beijing, China, November 15, 2021. Businesshala/Tingshu Wang

A total of 81 shares began trading here to mark the official launch of the exchange – which has been set up to serve small and medium-sized enterprises (SMEs), undermining President Xi Jinping’s “general prosperity” policy. The objective is to reduce the funding gap. Country.

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“It’s a pretty good performance for the first day. I don’t see a lot of foam,” said Yang Hongxun, an analyst at investment consulting firm Shenguang. Very unlikely to happen.”

Performance was mixed for another 71 stocks, which were moved from the ‘select tier’ of Beijing’s over-the-counter New Third Board to the new exchange.

Yi Huiman, chairman of the China Securities Regulatory Commission (CSRC), said the launch of the Beijing Exchange is a milestone in China’s capital market reforms.

“This is important because it will enhance the multi-layered capital market, improve financing for SMEs and promote innovation and upgrade China’s economy,” Yi said at an event on Monday.

The Beijing Exchange complements existing exchanges in Shanghai and Shenzhen that host companies with large market capitalizations.

More than 4 million investors have opened accounts to trade on the Beijing Stock Exchange, which has adopted a registration-based IPO mechanism — a system also adopted by Shenzhen’s Chinanext and Shanghai’s tech-focused Star Markets.

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circuit breaker

The first batch of companies listed on the exchange are mainly from sectors such as software, pharmaceutical and high-end manufacturing.

The buying was concentrated in 10 stocks that were recently cleared for listing. Listing for other stocks was long overdue, so largely priced.

Henan Tongxin Transmission Co., a company that manufactures automobile transmission devices, was the biggest gainer in morning trade, with gains of 504%, data from Oriental Securities showed.

Nantong Great Electric Co., Ltd. nearly quadrupled, while Hebei Raisen Information Technology Co. gained 280%.

The spikes triggered the circuit breaker, resulting in a temporary halt in trading of 10 stocks.

The exchange does not impose any limit on the maximum daily movement of these 10 shares on the first day of trading, but will limit subsequent moves in any direction at 30%.

Analysts said whether the rally can be sustained depends on the fundamentals of the companies.

According to the official Securities Times, 81 companies had an average income multiplier of 36 before their inception, excluding one firm that was making loss.

This compares with a price/earnings ratio of 71.84 for Shanghai’s Star Market and 60 for Shenzhen’s Chinanext.

The 81 companies listed on the new exchange have an average net profit increase of 18.99%, which is about 10 percent higher than Chinese onshore stocks on average, the paper said.

Investors with assets of at least 500,000 yuan ($78,347) in their stock account can apply for trading on the Beijing Stock Exchange – the equivalent limit to Shanghai’s Star Market.

Expect more cash to come.

According to the CSRC, eight mutual funds targeting the Beijing exchange have completed registration.

($1 = 6.3819 Chinese Yuan)

Reporting by Shanghai Newsroom; Editing by Himani Sarkar

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