China formally launches Nasdaq-style board
SHANGHAI: China today raised the curtain on its long-awaited Nasdaq-style board, ChiNext, in a key step towards setting up a multi-tier capital market and giving a boost to small and medium-sized firms.
Gold confetti rained down on a red ticker reading “Formally launched” in Chinese as the theme from the movie “Superman” blared in a hotel in the southern boomtown of Shenzhen, where ChiNext trade will begin on October 30. The new board will propel the development of high-growth start-ups, especially high-tech firms, Shang Fulin, chairman of the China Securities Regulatory Commission, said in a ceremony broadcast live on television.
“The launch of the growth enterprise board is an important step towards implementing the national strategy on promoting innovation,” Shang said.
Shares in 28 start-ups, ranging from software developers to medical device producers, will be on offer next week on the board run by the Shenzhen Stock Exchange. A total of 188 firms from across China have applied to list on ChiNext, according to Shang.
China’s economic planning agency, the National Development and Reform Commission, first proposed establishing a Nasdaq-style second board more than a decade ago, but the plan was shelved after the Internet bubble popped in 2000.
Regulators hope the new market will help fuel
start-ups and other companies with high-growth potential in the world’s third-largest economy, just as the Nasdaq has in the United States.
But there have also been worries that the new
board, which attracted strong interest from investors, may divert funds from the main indices and drag stock prices down.
Shang said investors must participate in
the growth enterprise market in a “rational” way, recognising that start-up stocks have high-growth potential but are also characterised by unstable financial results.
“The growth enterprise market faces relatively higher risks of irrational and speculative trading and market manipulation,” he said.
“The Shenzhen bourse... must closely monitor
the debut session
trading to prevent excessive speculation.”
The bourse has said if prices move up or down 80 per cent during the first day, trading will be suspended until the final three minutes of the session.