e-magazine
The Hot Zone
China's newly announced air defense identification zone over the East China Sea aims to shore up national security
Current Issue
· Table of Contents
· Editor's Desk
· Previous Issues
· Subscribe to Mag
Subscribe Now >>
Expert's View
World
Nation
Business
Finance
Market Watch
Legal-Ease
North American Report
Forum
Government Documents
Expat's Eye
Health
Science/Technology
Lifestyle
Books
Movies
Backgrounders
Special
Photo Gallery
Blogs
Reader's Service
Learning with
'Beijing Review'
E-mail us
RSS Feeds
PDF Edition
Web-magazine
Reader's Letters
Make Beijing Review your homepage
Hot Links

cheap eyeglasses
Market Avenue
eBeijing

Beijing Review Exclusive
Special> Coping With the Global Financial Crisis> Beijing Review Exclusive
UPDATED: April 9, 2009 Web Exclusive
More Than Investment
The Shenzhen Stock Exchange is to erect regulations to prevent from a stock price skyrocketing on the first day of the opening of the new growth enterprise board launched on May 1
By LI YUZHU
Share

Investment in the new growth enterprise board, a Nasdaq-like second board, is more risky than that in the main boards of the Shanghai and Shenzhen stock exchanges, Song Liping, general manager of the Shenzhen Stock Exchange, told Xinhuanet.com early this month.

"The Shenzhen Stock Exchange will, from the very beginning, work out regulations to strengthen risk prevention, intensify information exposure, and on the first day prevent stocks from skyrocketing, thus to maintain smooth operation of the market," said Song.

On March 31, the China Securities Regulatory Commission (CSRC) announced the launch of a growth enterprise board on May 1 as a platform to offer opportunities for small and medium-sized enterprises to raise money in the market, and for innovative companies to finance businesses that are expected to have a bright future.

Since the second board is to practice at the Shenzhen Stock Exchange, Song reminded investors that the risks of investing in the second board are larger, because innovative companies with only a few years' history are usually small in business scale and not stable in operation. The risks also include asymmetric information, uncertain technical innovation and immature principal investors.

Based on the CSRC's research on reform of the stock issue system, some measures are to be adopted in the second market, especially on May 1, to prevent stocks from skyrocketing, Song told Xinhua.

Song vows to intensify fair information and transparency of the market, revealing that a simulated deal before the stock exchanges start will be available with an aim to guide investors to offer reasonable prices.

The Shenzhen Stock Exchange plans to set up a delisting standard based on the state of listing companies in terms of their financial situation, operational ability, business achievements and market liquidity, according to Song.

"The threshold to list on the second board is high," said Gui Haoming, chief analyst at Shenyin & Wanguo Securities Co. Ltd. According to him, standards for companies planning to list on the Shenzhen second board market are even higher and the requests are stricter compared with second boards in other countries and regions. In some cases, it is even harder for a company to list on the second board market than on the main board market.

The CSRC requires the issuer earn not less than 10 million yuan ($1.47 million) in profits and achieve revenue growth of at least 30 percent in the last two consecutive years, and report profit of not less than 5 million yuan ($736,000) on revenues of at least 50 million yuan ($7.35 million) for the most recent year, according to Xinhua.

The high threshold will have some impact on the second board market, Gui noted.

First, it restricts the number of companies that meet the standards for listing, thus slowing the expansion of the second board. Some people worry that the launch of the second board will divert capital from the main board and cause the latter to drop. However, the high threshold means the small-scale market will have little impact on the main board.

Second, the high threshold encourages venture capital, which will help enterprises optimize allocation of their funds and properties and turn out outstanding businesses. Investors will also find a sound way to take back their funds.

And finally, the blind hyping would be weak. In the past some people have talked up innovative enterprises with the aim of driving up share prices. But the barriers to listing on the second board will lower investors' expectations and promote reasonable investment for shares of the enterprises. This is a necessary condition to stabilize the current market.



 
Top Story
-Protecting Ocean Rights
-Partners in Defense
-Fighting HIV+'s Stigma
-HIV: Privacy VS. Protection
-Setting the Tone
Most Popular
 
About BEIJINGREVIEW | About beijingreview.com | Rss Feeds | Contact us | Advertising | Subscribe & Service | Make Beijing Review your homepage
Copyright Beijing Review All right reserved