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Main boards may feel little impact from GEB debut

By Fei Ya (China Daily)
Updated: 2009-10-20 10:08

The trading debut of the growth enterprise board (GEB) later this month may not have a significant impact on the nation's main board markets in the next few weeks, according to analysts.

The first batch of 28 companies to be listed on China's NASDAQ-like GEB for start-up firms next week is expected raise around 10 billion yuan ($1.46 billion) from the capital market. In contrast the Shanghai and Shenzhen main boards together have around 9.5 trillion yuan worth of floating shares, analysts said.

China plans to launch its long-awaited NASDAQ-style GEB on Oct 23, China Securities Regulatory Commission Chairman Shang Fulin said during the weekend in Beijing. The first batch of 28 companies would make their trading debuts a week later, on Oct 30, according to the Shenzhen Stock Exchange.

"International experience from Hong Kong's high growth market or NASDAQ in the United States have shown that the trading debuts of start-up firms have not drained money from the main boards," said Chen Xiaosheng, research director of Shanghai-based Shenyin Wanguo Securities. "Even though it could affect the market on the debut day, the main boards would recover from the next day onward."

According to data from Shanghai-based Wind Info, the 28 GEB companies have together attracted 1.87 trillion yuan during the subscription process, lower than market expectations.

"On average, a single GEB company has managed to raise only around 300-500 million yuan, compared to big IPOs on the main board such as China State Construction Engineering Co Ltd and Metallurgical Corporation of China Ltd, each of which has raised over 40 billion yuan," said Wang Shuxu, general manager for institutional investor services at Guangxi-based Sealand Securities.

The major index of China's stock market, the Shanghai Composite Index, yesterday rose 2.07 percent to close at 3,038 points. The market appeared little moved by long-awaited news that trading would begin on Oct 30 on the new market for start-up shares.

Related readings:  Milestones for the launch of China's GEB  Insurance intermediaries eye GEB  China's Nasdaq-style GEM to start trading Oct 30  Date set for GEM-listed firms

Analysts pointed out that several key economic figures for the third quarter and for September that are due for release on Thursday would have a bigger impact on the markets compared to the debut of GEB. China's gross domestic product grew more than 7 percent in the first nine months, Xiong Bilin, a senior official from the NDRC said yesterday.

But Wang Wei, analyst from Shanghai-based Haitong Securities, disagreed, saying that the market trend for this week may be closely connected with the new board. Wang feels investors should wait and see before they enter the market.