Beijing Stock Exchange opens with over 100% gains for 10 companies

Huang Yixuan
As a key step forward in China's efforts to revamp its capital market, the new bourse is set to serve myriad small and medium-sized enterprises.
Huang Yixuan

The newly established Beijing Stock Exchange started trading on Monday with shares of 10 companies closing the day over 100 percent up.

As a key step forward in China's efforts to revamp its capital market, the new bourse is set to serve myriad small and medium-sized enterprises, which is in line with Chinese President Xi Jinping's "common prosperity" policy aimed at reducing wealth gaps in the country.

A batch of 81 stocks made their debut on the bourse, among them were 10 companies that were newly approved. The others were transferred from the selected tier of the city's over-the-counter National Equities Exchange and Quotations (NEEQ), which was set up in 2013.

The 10 newly listed firms, mainly from sectors such as software, pharmaceutical and high-end manufacturing, all skyrocketed on the first trading day.

Automobile transmission device manufacturer Henan Tongxin Transmission Co at one point hit an intraday peak of nearly 530 percent. It closed at 493.67 percent to become the biggest gainer.

It was followed by Nantong Great Electric Co, Hebei Zhisheng Information Technology Co and Anhui Jingsai Technology Co, all of them ending the day with gains of over 200 percent.

The spikes triggered circuit breakers, resulting in temporary halts in the trading of the 10 stocks. The stock exchange had set no limits on the maximum daily movement of the newly listed stocks on the first trading day. But trading was to be suspended for 10 minutes when stock prices fluctuate by over 30 percent and over 60 percent.

After the first trading day, moves will be capped at 30 percent in either direction on this bourse.

The price limit mechanism on BSE is different from that on Shanghai's STAR Market and Shenzhen's ChiNext board – two Nasdaq-style boards on China's two major bourses. The latter two set no price limits for the first five trading days but set a cap of 20 percent later.

The 30-percent limit on BSE is wider to increase market flexibility and better approach to Nash equilibrium in trading, according to Ren Xeping, chief economist of Soochow Securities Co.

Meanwhile, performance was mixed for the other 71 'old' stocks transferred from the NEEQ.

Battery-maker BTR, which has the highest market value among the 81 companies, fell over 8 percent at the closing bell. Tonghuijiashi (Beijing) Information Technology Co, which produces integrated display application services, led the decline with a nearly 16-percent fall.

Yi Huiman, chairman of the China Securities Regulatory Commission, hailed the launch of BSE as "another landmark in China's capital market reform and development."

"It is also of vital importance in creating a multi-level capital market, improving financial support for SMEs, as well as promoting innovation-driven development, and economic transformation and upgrading," he said at the launch ceremony.

Ren said the establishment of BSE sends out a signal of the state supporting SMEs with specialized, unique and innovative technologies while boosting market confidence.

As a new channel connecting SMEs with the capital market, the new bourse can alleviate the difficulties and the high cost of financing for the SMEs. At the same time it can guide the startups in their fledgeless stage and help cultivate more leading high-tech enterprises, Ren added.

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