Innovative SMEs are expected to choose the newly set-up Beijing Stock Exchange (BSE) for listings, the China Daily reports. Tong Honglei, Chairman of a Beijing-based smart archive provider, was pleasantly surprised when he heard of China’s decision to set up a stock exchange to improve financial services for small and medium-sized enterprises like his business. “I was excited to hear the country was establishing the Beijing Stock Exchange,” said Tong, Chairman of the Beijing Roit Intelligent Technology Co, which provides digital archive search solutions as well as services that enable automatic location and fetching of physical materials.“The Beijing bourse is undoubtedly the first-choice listing venue for innovative SMEs like Roit,” Tong added. “It will help us access capital in an easier, faster and more cost-efficient way. ”The new bourse is expected to shorten the time it will take for Roit to get listed from three or four years to about two years, Tong said. It will also halve the financial costs of doing so, to more than CNY10 million.”
President Xi Jinping announced on September 2 that China will set up a stock exchange in Beijing and build it into a major base for serving innovative SMEs. It will bring the total number of national stock exchanges to three in the Chinese mainland, including those in Shanghai and Shenzhen. Officials, experts and business leaders said setting up the Beijing bourse marks a major milestone for China in perfecting its multi-layered capital market while also supporting innovative SMEs and deepening the new “dual-circulation” development paradigm, the cornerstone of the country’s latest five-year plan.
Xiao Chunan, Executive Director of China Renaissance Securities’ Investment Banking Department, said he has included the BSE as a new listing option for his corporate clients who are under pre-IPO tutoring. “This is not only about adding one more listing option. It means that SMEs can consider filing an IPO earlier than before, thanks to the Beijing bourse’s easing of listing requirements,” Xiao said. “Many of them no longer need so many rounds of pre-IPO financing as before. Instead, they are considering obtaining finance after getting listed, which will be much easier than as an unlisted company.” The BSE already released key rules including listing and investment thresholds, and has run two technical tests to get market players ready for its trading commencement. The bourse is yet to specify the date of market opening. Listing requirements and trading rules of the Beijing bourse are friendlier to SMEs than those of its Shanghai and Shenzhen peers. For example, the BSE requires a minimum valuation of CNY200 million for applicants to be listed, much lower than the CNY1 billion minimum valuation threshold of the STAR Market and the ChiNext board.
Experts said the new bourse will not only make it easier for SMEs to float shares, but also facilitate the financing of smaller firms yet to become qualified for IPOs, especially those traded on the new third board, officially known as the National Equities Exchange and Quotations (NEEQ). It is a national equity trading system that debuted in 2013 but was not an exchange market. It has suffered from lukewarm liquidity, firms exiting, and relatively poor financing. The Beijing bourse was founded based on the NEEQ Select, the highest tier of the new third board, which means all of the 66 NEEQ Select-traded companies will become BSE-listed firms. Share prices of the 66 firms surged by an average of 39.01% in the week following China’s announcement to set up the exchange, according to Essence Securities. Additional companies to be listed will come from those previously traded on the Innovation tier, the NEEQ’s second-highest tier, for 12 consecutive months. They must also meet BSE’s listing requirements. Companies on the Innovation tier in turn come from qualified ones on the NEEQ’s lowest tier, the Base tier.
The BSE completed its second technical test on October 9 with 98 securities firms, 10 information providers and eight fund companies participating in the test run, which mainly dealt with investor suitability, scope of authority, performance disclosure and trading channels. The exchange’s first technical test took place on September 25.