The highly anticipated opening of the Beijing Stock Exchange, which will be a fundraising platform for innovative small and medium-sized technology companies, has attracted interest from professional investors as many funds are paying close attention to the companies to be traded on the new bourse.
The BSE will initially be built upon the NEEQ Select, the highest tier of the National Equities Exchange and Quotations launched eight years ago. Qualified companies trading on the NEEQ Innovation Component Index－the NEEQ's second-highest tier－can apply to be listed on the Beijing exchange as long as they remain listed on NEEQ Innovation for 12 consecutive months.
Public information from the Asset Management Association of China shows that there were 662 operational private equity products specializing in the investment of NEEQ-listed companies as of Friday. Up to 12 such products have been introduced so far this year, two of which were launched after the country announced on Sept 2 that it would set up the BSE.
Ever since the first five mutual fund products targeting NEEQ companies opened for subscription in early June last year, up to 19 such products have been launched, of which 14 were released this year.
While the number of mutual fund products is not that eye-catching when compared to PEs, mutual fund firms have been busy studying NEEQ Select companies and making necessary preparations. Shenzhen, Guangdong province-based Bosera Funds said that they have included core targets among NEEQ Select into their research.
Other industry big names such as China Asset Management, Southern Asset Management and ICBC Credit Suisse Asset Management all expressed early last month that they would actively participate in BSE trading.
On the other hand, mutual fund companies have held a firm stance concerning their investment in NEEQ companies. China Universal Asset Management holds more than 12.3 million shares of NEEQ-listed Newange Environmental Sanitation Co Ltd. Up to four mutual fund companies possess over 2.5 million shares of lithium-ion battery solution provider BTR New Material, which has seen its shares surge more than 75 percent since the beginning of September.
The buoyant market already reflects growing investor interest. Public information shows that the total market value of the 66 companies listed on NEEQ Select reached 238.4 billion yuan ($37.1 billion) on Thursday, up 35.7 percent from the value on Sept 1. Daily trading volume on NEEQ Select has increased by 2.7 times and the price of the stocks has increased by an average 35 percent since that date.
Zhu Haibin, chief NEEQ analyst from Essence Securities, said that average price-to-earnings ratios of tech companies listed on NEEQ Select are near 40 times, up from 30 times in late August. But it is still far from the average 57-times PE ratio reached by ChiNext companies as of Friday. As tech companies on NEEQ Select outperform those traded on ChiNext in terms of profitability and growth rates, investors can expect more value increases from NEEQ Select companies.
Li Zhan, chief economist of the research department at China Merchants Fund, said that the establishment of the BSE is integral to the ongoing reform of China's capital market. Not only will tech SMEs be in clearer focus, but also major breakthroughs will be reached regarding issuance mechanisms, investment thresholds and the financial support provided to tech SMEs, Li said.