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So far 108 technology firms have filed applications to list the companies on the upcoming stock board of Shanghai Stock Exchange. Photo: Xinhua

China’s regulator urges brokerages to monitor investors’ funding needs to trade on Nasdaq-style market

  • Retail investors must meet minimum investment threshold of US$72,900 to trade stocks on the new board, which is likely to debut in the middle of this year

China’s securities regulator has ordered brokerages to step up oversight of retail investors’ applications for trading on the upcoming Technology Innovation Board, as it is determined to keep the Nasdaq-style market free of small players.

Although the China Securities Regulatory Commission did not announce the move on Monday, brokerages said they had been asked by the CSRC to to ensure that investors meet the minimum investment capital of at least 500,000 yuan (US$72,900) to trade stocks on the new board. It is expected that new board is likely to debut in the middle of this year.

The intensified efforts to bar small investors from buying and selling shares of companies that are perceived as China’s future stars show that Beijing is keen to prevent potential topsy-turvy fluctuations on the new market.

The innovation board, President Xi Jinping’s fundraising project to buoy the mainland’s promising technology start-ups, is touted as a drastic reform of the country’s capital market. The move for the first time allows unprofitable companies to list on China’s stock exchanges.

Investors hunt for gold ahead of debut of China’s Nasdaq-like technology board

As of Monday, 108 technology firms had filed listing applications to the Shanghai Stock Exchange.

“The requirements on brokerages to tighten reviews on retail investors’ applications is a fresh sign that the regulators are still giving priority to risk control while accelerating preparations for the new board,” said Wang Feng, chairman of Shanghai-based financial services firm Ye Lang Capital.

He added that the first batch of companies to list on the board will be the new darlings of mainland equity investors because of the high expectations riding on these firms and the important roles they are expected to play in the country’s economy.


Stocks of companies on the new board will be allowed to trade freely for the first five days, but they will be subject to a 20 per cent upside or downside limit from the sixth trading day onwards.

Shares of companies that list on the regular Shanghai board are allowed to trade without limit on the first day and thereafter are allowed to rise or fall by 10 per cent.

Some brokers said that it is because of the greater fluctuation in stock prices that could lead to higher losses for small investors, the regulators have stipulated the 500,000 yuan minimum investment threshold. It is estimated that 85 per cent of individual Chinese investors are unable to meet the requirement.

The brokerages are also required to carefully examine the origin of the funds the retail investors deposit in the trading accounts.

US$45 billion in mutual fund inflows forecast for China’s Nasdaq-style tech board

Some brokers say that many retail investors are borrowing money on the black market and using them to complete the application process before withdrawing the funds to repay loan sharks.


“Only those who really have 500,000 yuan of their own capital will be allowed to trade shares on the new board,” said Ding Haifeng, a consultant with Integrity Financial Consulting. “The message is clear: unseasoned investors are not welcome.”

On the mainland, retail investors actively chase short-term gains regardless of the valuation of the companies, particularly in newly listed stocks.


Since 1990, nearly all initial public offerings have surged by at least 30 per cent on the first trading day, often followed by plunging prices when investors resort to profit-taking.

This article appeared in the South China Morning Post print edition as: Brokerages told to vet tech board investors