(Yicai) Sept. 4 -- Stocks traded in Beijing soared after China’s securities regulator introduced measures over the weekend to attract more investors to the two-year-old bourse following a 14-month slide in the benchmark index.

After jumping by as much as 7.6 percent at one point today, the Beijing Stock Exchange 50 Index [BJ: 899050] ended 5.9 percent higher at 850 and trading volume swelled to CNY3.5 billion (USD483 million). The index, which comprises 50 representative stocks listed on the exchange, sank to a record low of 751.4 at the end of last month, having tumbled 37 percent from a 1,198 high set last July.

The 19-point document issued by the China Securities Regulatory Commission focuses on improving the Beijing bourse’s market liquidity. Investors in Shanghai’s Nasdaq-style Star Market can now access the Beijing stock exchange with a click of a button, initial public offerings will be made easier, curbs on firms listed on the Beijing bourse moving to the Shanghai and Shenzhen stock exchange are being relaxed and third-party market-making transactions facilitated.

The Beijing bourse and the National Equities Exchange and Quotations, a Beijing-based over-the-counter market, said they will immediately implement eight of the measures.

"We didn’t expect so many new policies to come out at once," said Gao Fengyong, chairman of private equity firm Blue Ocean Capital. The move exceeds expectations and demonstrates the determination of regulators to boost trading on the Beijing stock exchange and to help increase market valuations, he added.

By allowing traders on Shanghai’s Nasdaq-style Star Market to easily access the Beijing stock exchange, it will attract a great deal more traders to Beijing, said Gao. Many of the current investors in Beijing are not very active, while the Star Market has twice as many at around 10 million and they are more active. 

Previously, only investors who had gone through the complex qualifying process could buy stocks on the Beijing bourse due to the relatively high investment risk of low cap stocks.

The Beijing stock market, which opened in November 2021, mainly caters to small and medium-sized companies. There are 210 companies listed on the bourse at present, and many of these were originally from the NEEQ Select. The bourse has been plagued by lack of market liquidity and its average daily turnover is only about CNY1 billion (USD137.6 million).

More Attractive

Since the market valuation of comparable companies on the Beijing bourse is currently several times lower than their counterparts on the Shanghai and Shenzhen markets, the new policies will make it easier for companies listed in Beijing to move to Shanghai or Shenzhen, Gao said. The potential boost to their value after the transfer will make Beijing-listed firms much more attractive to outside investors than before.

On the other hand, the smaller overall capitalization of the Beijing bourse also makes it difficult for the stock exchange to attract large funds to enter it, he added. The new policies will spur more active IPOs and the expectation of a bigger and a better liquidity market will also trigger more trading as well as potential listings in Beijing.

"We’re going to transfer our early investment target’s IPO application to the Beijing stock exchange," the general manager of a private equity fund told Yicai. One of the companies it has invested in at the seed stage has been waiting for a long time to go public on the Shenzhen stock exchange’s growth enterprise market. Now that the Beijing stock exchange has relaxed its listing restrictions, they will instead aim to go public in Beijing.

Editor: Kim Taylor