Chinese brokerages rally after Xi announces plan to set up Beijing exchange
- A gauge of 56 brokerages trading on China’s onshore markets rally by as much as 4.3 per cent to its highest level since January
- Creation of Beijing exchange will deepen reform of capital’s over-the-counter market, strengthening its ability to serve smaller companies: CSRC
A gauge of 56 brokerages trading on China’s onshore markets rallied by as much as 4.3 per cent to its highest level since January.
While details of the new bourse remain unknown, it was being viewed as a direct competitor to Shanghai’s Star Market and Shenzhen’s ChiNext board, the primary listing venues for smaller companies, particularly those engaged in technology businesses.
The ChiNext index dropped 1.2 per cent on Friday over concerns that a bigger supply of small caps will dent demand. A gauge of the top 50 companies on the Star Market declined by as much as 1.2 per cent before reversing the loss to rise 0.1 per cent.
“The impact of an increase in new stocks’ supply will be limited,” said Liu Jing, an analyst at Shenwan Hongyuan. “It will be conducive to boosting the liquidity of companies on the OTC market and brokerages’ investment banking businesses.”
The creation of the Beijing exchange will deepen a reform of the OTC market, strengthening its ability to serve smaller companies, the CSRC said.
The market was launched in 2013 for companies that were ineligible for main board listings and were delisted from the Shanghai and Shenzhen bourses. More than 7,300 companies with a combined market capitalisation of 2 trillion yuan (US$310 billion) currently trade on it.
Higher investment thresholds make it an illiquid market – only investors with at least one million yuan in assets in stock accounts are qualified to trade on it. Less than 1 per cent of the shares of the 66 companies in its highest tier changed hands on a daily basis in August, according to Shenwan Hongyuan.