Plans for new stock exchange in Beijing fuel fears of financial ‘war’, says media

Economy

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Economist says it is still a big question mark whether the new stock exchange will prosper, as “the city of Beijing does not have the right culture for a stock exchange”.

China’s plans to launch a new Beijing stock exchange, announced by President Xi Jinping on Thursday, boosted shares in Chinese brokerages, but plunged Hong Kong stocks amid fears of rising stocks. competition.

While China’s securities regulator has said the planned Beijing stock exchange is based on the city’s existing New Third Board and complements the Shanghai and Shenzhen stock exchanges, some fear a rivalry to list resources is inevitable.

“The Beijing stock exchange is on a par with the Shanghai and Shenzhen stock exchanges. If it prospers, the three will split the market in a tripartite showdown,” said Rock Jin, economist and CEO of investment adviser PopEton, quoted by Reuters agency this Friday (3).

While this is good news for the economy, it bodes ill for the market in the near term because “it takes capital out of the Shanghai and Shenzhen markets after all,” adds the economist.

© REUTERS / Aly Song

People in the Main Commercial Area of ​​Shanghai, China, July 12, 2021

Rock Jin also said that it is a big question mark whether the new exchange will prosper, as “Beijing City doesn’t have the right culture for an exchange.”

Neither Xi nor the China Security Regulatory Commission (CSRC) said whether the Beijing stock exchange would attract overseas-listed companies. The new exchange intends to serve innovative small and medium-sized companies (SMEs), says the media.

“This is a step forward in capital market reforms, as it improves the multilayered capital market system and direct financing,” investment bank Morgan Stanley said in a note, reproduced by Reuters.

The bank added that the implementation of an Initial Public Offering (IPO) mechanism on the Beijing stock exchange paves the way for the implementation of the listing system in the main boards of directors in China. Currently, only ChiNext exchange in Shenzhen and STAR Market in Shanghai adopt the US-style IPO system.

Shenzhen Stock Exchange in China

facilitate financing

China is launching the new bourse as part of efforts to channel more household savings into the stock market to finance innovation and economic recovery, while reducing the economy’s reliance on bank loans.

“The difficulty of financing is the main challenge facing SMEs […]. Supporting SMEs with direct financing helps promote China’s consumption as SMEs employ the majority of the workforce in China,” says Liu Hui, fund manager at Invesco.

The CSRC announced this Friday (3) a draft rules for the sale of shares, trading and delisting on the new stock exchange. Companies to be listed on the Beijing Stock Exchange are “smaller and younger” than those listed in Shanghai and Shenzhen, and eligible ones can also migrate to the other two exchanges without any problems, said Zhou Guihua, CSRC official, quoted by media .