China's leading over-the-counter exchange cracks down on illegal trading

The mainland's leading over-the-counter (OTC) equity exchange is cracking down on illegal trading, with concerns growing that the market, which is aimed at small, high-growth firms and private equity investors, is overheating.

The operator of Beijing's New Third Board said on Tuesday it was investigating a series of "ultra-high" price quotations during the week of March 23-27. The price of one share of Anhui Hauheng Biotechnology, for example, at one point cost 99,999.99 yuan (HK$126,500) before falling back to 1,058 yuan a share.

Such high quotes can be an indication that a stock is being manipulated, with very large prices being used to entice people into the market.

The National Equities Exchange and Quotations, which operates the exchange, said it was investigating some trading accounts that had "seriously disrupted market order".

"We have zero tolerance, and will take out our sword," it said.

The New Third Board used to be a backwater, but government policies aimed at developing alternative funding sources for small companies, which often lack access to bank loans, have turned it into the mainland's hottest stock market over the past year, with more than 2,000 companies now listed.

Premier Li Keqiang visited the New Third Board in December, and said he hoped it could become a leading example for the development of OTC markets across the mainland.