New Beijing benchmark index to attract investors

Anniversary package to drum support for ‘little giants’

“We expect 2023 to be a key turning point that will see the Beijing Stock Exchange become bigger and stronger.” Zhu Haibin

SHANGHAI: The Beijing Stock Exchange’s (BSE) benchmark index opened up 2% on its debut as the year-old market tasked with fostering innovative small companies attempts to build liquidity and narrow the gap with larger exchanges in Shanghai and Shenzhen.

The publication of the BSE 50 Index is part of a raft of measures designed to drum up investor interest, including plans to halve trading fees, allow margin financing and introduce market marking.

The first anniversary package is aimed at luring fresh capital and accelerating initial public offerings (IPOS) in a market endorsed by President Xi Jinping with a mandate to fund innovative small companies called “little giants” that specialise in niche sectors.

“This is ‘common prosperity’ in financing,” said Zhou Yunnan, founder of NS Capital Co, referring to Xi’s drive towards social equality that led to crackdowns on tech giants such as Alibaba Group and Tencent Holdings.

But he added that a liquidity shortage is the “most pressing” issue facing the exchange, which competes for capital with the bigger Shanghai and Shenzhen bourses.

The combined daily turnover of the 126 companies listed on the Beijing bourse is merely around one billion yuan (Us$140.47mil or Rm639mil), less than that of the single most actively traded stock listed in Shanghai.

The rollout of the BSE 50 Index, which tracks the exchange’s biggest companies, including Jilin Tangu Carbon Fiber Co and BTR New Material Group, will provide “a tool to monitor overall performance,” general manager Sui Qiang said in comments on the BSE’S website.

The gauge rose more than 3% in early trading, bucking the bearish trend in the broader market as Covid-19 case numbers rose in Beijing.

According to Refinitiv data, 50 companies have raised a total of 10 billion yuan (Rm6.4bil) through IPOS on the Beijing Stock Exchange this year.

In contrast, more than 100 companies raised 203.5 billion yuan (Rm130bil) on Shanghai’s tech-focused Star Market, while 164 billion yuan (Rm104.8bil) was raised on Shenzhen’s start-up board Chinext via 133 IPOS.

Zhu Haibin, an analyst at Kaiyuan Securities, expects the exchange’s IPO market to expand rapidly next year on improved liquidity.

“We expect 2023 to be a key turning point that will see the Beijing Stock Exchange become bigger and stronger,” Zhu wrote in a report to clients.

Mandy Zhu, head of China global banking at UBS, said the Swiss bank has little business exposure to the Beijing exchange yet, but is closely monitoring its development.

“The Beijing exchange helps nurture ‘little giants’, which may consider relocating to other Chinese bourses or listing in Hong Kong. That will create opportunities for our investment banking business.”