China formally launches Nasdaq-style board

Last Updated: Friday, October 23, 2009 - 21:30

Shanghai: China on Friday 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

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.

Bureau Report

First Published: Friday, October 23, 2009 - 21:30

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