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China launches own 'Nasdaq'
Published on: 2009-10-19
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China will this week launch its long-awaited Nasdaq-style stock market with 28 companies lined up to list on the new exchange, including China's first listed film company.


Shang Fulin, chairman of the China Securities Regulatory Commission, on Saturday said the new market would open on October 23, according to the official Xinhua news agency.


Investors have not demonstrated overwhelming appetite for the first companies to conduct IPOs ahead of listing on China's new Growth Enterprise Market. The Shenzhen-based market is aimed at funding technology and innovation-driven start-up companies, in line with Beijing's plans to shift the Chinese economy from its traditional export base.


Small and medium-sized companies in this sector have enjoyed little access to the flood of bank lending that has been available to larger and state-owned enterprises since the beginning of this year.


Shares in nine companies involved in a third round of subscriptions for the board were oversubscribed.


The listing of Huayi Brothers Media, the well-known Chinese film company, demonstrates the Chinese government's recent encouragement of companies in the highly-regulated culture industry to seek public funds to boost their size and quality.


Beijing, which has been considering launching such a board for nearly 10 years, hopes it will not only provide funds for cash-starved start-ups, but eventually even rival Nasdaq and London's Aim market as a source of small Chinese company funding.


The launch of the new board could have a psychological impact on investors in other Chinese markets who are already concerned about the large number of recent IPOs draining liquidity from the market, stock market analysts said.


But Peng Yunliang of Shanghai Securities says he does not think the launch of the GEM will do much to depress other mainland markets because the small size of the second board.


Analysts are sceptical about the GEM's prospects for success.


"China's problem is not so much the number of boards but are enough of those companies lined up for funds genuine viable long-term businesses?" says Fraser Howie, author of Privatizing China: Inside China's Stock Markets. "Nasdaq has got huge critical mass with major listings. It will be much harder for the GEM to achieve that critical mass"

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