Brokers and fund managers forecast a slow debut for the proposed growth enterprises market (Gem) due to poor market sentiment and its high-risk nature. The Gem, formerly the second-board market, will be launched in the fourth quarter of next year. It is designed to provide a means for small and medium-sized companies to raise capital, and will have lower entry requirements than the main board. Prudential Portfolio Managers Asia regional director Andrew Look said the Gem would be successful only in a bull market. 'When the market is in a downtrend, investors simply will not be interested in buying small companies' shares,' he said. Hong Kong Stockbrokers Association chairman Dannis Lee Jor-hung agreed: 'Currently, there are many second or third-liners in the main board that do not have any trading at all. 'I think investors will be more cautious about investing in the Gem.' Mr Lee said the $50,000 minimum transaction size - already reduced from $250,000 - was too high for many retail investors. As a result, the market would lack liquidity. However, he agreed the exchange should set a minimum transaction size to remind investors of the high risk of Gem companies. In overseas markets, up to 70 per cent of second-board companies failed. A requirement that Gem companies have a 10 per cent public float might be too low, making it easier for a big investor with a large number of shares to manipulate the market, he said. Mr Look said the Gem would provide a chance for small enterprises to raise funds. 'Banks usually are reluctant to lend to companies without a profit record or assets,' he said. 'As a result, property developers find it easier to get bank financing than manufacturers or hi-tech companies. 'The Gem will provide another funding source for them.' Connie Fung Man-yu, managing director of British fund manager Newton Distributors Asia, said the Gem would provide more choice for overseas fund managers. 'The main-board blue chips are dominated by the property companies. The Gem will expand the local market's dimensions to include more hi-tech companies and manufacturers,' she said. The stock exchange on Tuesday said it was seeking 20-30 high-quality companies to form the first batch of listings on the Gem.