Trading platform to be starting point for further capital market reforms

The NEEQ Select, China’s newly launched equity market for small and medium-sized enterprises, will improve asset pricing in the nation’s capital markets and spur the real economy, officials and experts said on Monday.

The comments came after the NEEQ Select, a new tier of the National Equities Exchange and Quotations, the nation’s equity trading system oriented for SMEs, also called the “new third board”, debuted on Monday.

Yan Qingmin, vice-chairman of the China Securities Regulatory Commission, the top securities regulator, said the NEEQ Select is a milestone in the development of the capital market and a starting point for further reforms.

“The CSRC will coordinate the development of the three tiers-select, innovation and base-of the NEEQ, strengthen market regulation and risk prevention, and continuously enhance the heft, attractiveness and competitiveness of the NEEQ,” Yan said.

The first batch of 32 listed firms made their market debuts on Monday and witnessed a mixed performance. Ten firms registered gains on Monday, with Suzhou Tonyshare Electronic Materials Technology Co Ltd, a photovoltaic component maker, seeing its share price rise by 55.4 percent to 15.82 yuan ($2.26) per share.

Meanwhile, 21 of the firms posted declines, with prices falling below the offer prices. Four firms saw losses of more than 20 percent on their debut, with some even triggering the circuit breakers after sharp declines, a phenomenon that has been rare for newly-listed shares on Chinese bourses.

Wang Tingting, an associate professor of finance at the Central University of Finance and Economics, said the gains and declines of the new shares are an indication that the institutional breakthroughs of the NEEQ Select are helping share prices reach their intrinsic values.

The connection of the select tier with the exchange markets, in tandem with more liberalized trading rules, will boost liquidity condition in the select tier and help rationalize the share prices after they debut on the tier following initial volatility, Wang said.

China launched the NEEQ Select as the highest tier of the NEEQ system, with the most stringent listing requirements and trading rules close to those on the Shanghai and Shenzhen stock exchanges.

Qualified firms listed on the innovation tier can apply to enter the select tier, while firms which have listed on the select tier for at least one year and meet the requirements of initial public offerings on Shanghai’s STAR Market and Shenzhen’s ChiNext board can change their listing venues upon approvals from the bourses.

The process will entail no reviews or approvals from securities regulators, providing a convenient channel for qualified growth firms to get listed in the more liquid exchange markets and receive higher valuations.

Also, the select tier has adopted easier requirements for investors to become qualified for trading than other NEEQ markets, a public offering system, and a continuous auction trading method, all conducive to improving the efficiency of the new tier in asset pricing, analysts said.

Xie Geng, chairman of NEEQ Co Ltd, said the select tier will help improve the efficiency of corporate financing, while the company will continue to push ahead innovations on the NEEQ to vitalize the market.

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