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Shenzhen Stock Exchange revamps trading system

SZSE held the celebration for 10-year anniversary of the 4th version of trading system, also for launching the construction of the 5th version of trading system.

The 4th version of trading system, officially launched on November 12, 2001, was independently researched and developed by SZSE, which, adhering to the fundamental principal of “secure, efficient and self-controllable”, constantly expands and improves the function and performance of the system in light of the needs for constructing China’s multi-layer capital market. In the past 10 years, the 4th version of trading system has witnessed the establishment of split share structure reform, SME Board, ChiNext, and Zhongguancun Park Enterprises Stock Quotation System, and other major business innovation including ETFs, LOFs, margin trading securities lending in the process of rapid development of Shenzhen securities. It plays a significant role as technology support to guarantee the safe and stable market operation and push forward the construction of multi-layer capital market. By far, the 4th version of trading system has provided trading services for as many as 1800 securities, 4700 sales networks and 100 million investors, with the actual peak amount of daily entrusted deals handled as high as 22.47 million, and a 10-year record for continuously safe operation.

As multi-layer capital market continuously develop healthily in China, SZSE, on the basis of ongoing plan, now officially implement constructing new version of transaction system, namely the 5th version of transaction system, so as to support the future business development, provide better market transaction services, and reinforce market competitiveness. The prospective 5th version of trading system aims at, on the one hand, building a scientific and sound structure with higher efficiency, larger capacity, better security, more expansibility and more flexible business adaptation, on the other hand constructing an integrated transaction platform capable of supporting multi-layer, multi-variety, multi-market. It is expected to be launched in 2015, by the time of which the new system’s speed of handling orders will reach more than 200 thousand deals per second.

Chen Dongzheng, Chairman of SZSE Council, and concurrently Secretary of SZSE Party Committee attended the ceremony and announced the official launch of the research and development for the 5th trading system.

Source: Shenzhen Stock Exchange, 16.11.2011

Filed under: China, Exchanges, Trading Technology, , , , , , , , , , , ,

ChiNext: A Wrongheaded, Sheltered Start

The lesson from the ChiNext launch is as old as China’s stock market: Too much regulatory protection leads to speculation.

(Caijing Magazine) China’s growth enterprise board ChiNext recently opened after 10 years in the making. Hopes ran high, and trading sizzled. But the debut quickly led to disappointment, recalling the now-sputtering Shenzhen SME board, which began with a dramatic flash but eventually cast a pall over growth stock trading.

Shares for all 28 companies on the ChiNext board skyrocketed to the 10 percent limit on opening day. Shares in Jinya Technology, for example, surged 80 percent in a buying frenzy. Overall, first-day gains averaged 106 percent.

But it was a flash in the pan, unchecked by regulator warnings and a fat book of regulatory measures designed to prevent speculation. Within a few days, prices tumbled. Suddenly, ChiNext was nothing more than a new game in town that pulled players into the same kind of mania seen a couple of years ago when PetroChina A-shares reached the stratosphere in an IPO and when stock warrants had manipulated, rollercoaster price changes. Moreover, some of the 28 newly tradable companies became subjects of critical media stories about instant wealth, overselling of pre-IPO shares by management, and cases of cooking the books.

How did this newborn trading platform, so carefully planned and nurtured through a long gestation, fall captive to the old, genetic flaws of China’s stock markets? A crucial factor was excessive protection.

A successful growth enterprise board is not just a capital-raising platform; start-ups are far more valuable than blue chips in many ways. ChiNext was designed to encourage start-ups and new technology companies. It should be in a position to help traders pan for gold and turn ugly ducklings into swans.

But ChiNext was never given enough room to let the market play its resource allocation role. In the first place, IPOs for ChiNext still had to go through a government authorization process. Each of the 28 companies was chosen by regulators from among hundreds of applicants. This review process, which is based on company documents provided to the government rather than through public information disclosure, may look like accountability in the eyes of investors. But it actually restricts market selectivity.

The selection process was designed to signal that each of the 28 companies had a good chance for survival. So after giving permission to this first batch of companies for board trading, regulators suspended review of new applications for a month and concentrated on the ChiNext launch. Media euphoria and promotion activity by energetic brokers further diluted any sense of risk awareness among the trading public.

Yet such artificial control of supply and demand distorts the market. And this is nothing new. Past experience has shown that it’s futile in such circumstances to prevent volatility through regulation and investor warnings following an application process.

Moreover, speculation fire was fanned by murky delisting requirements. Regulations covering growth enterprise stocks on the Shenzhen Stock Exchange, which sponsors ChiNext, say companies should be warned before being delisted. The exchange, however, can rescind a warning if a company implements a “restructuring plan.” This means that, despite the rule for delisting start-ups, the exchange still leaves a back door open to creating shell companies – and attracting punters – by allowing restructuring. Such loose market conditions help whip up speculative frenzy.

Of course, conditions are similar on the A-share main board. Excessive protection stems from a regulatory intent to list quality companies and inject vitality into the market. And in the area of delisting, strict enforcement is out of the question because regulators feel compelled to bow to public sentiment and give any shaky company another chance in the name of investor protection.

However, this protection oversteps the bounds and chokes market vitality. It will surely backfire. Regulators have created conditions for rent-seeking by listed companies, which then turns investors into speculators.

Success for ChiNext should depend on several big-picture factors including growth potential, investment environment and rule of law in society. Regulators can not and should not guarantee financial results and return on investment; they should not set goals for market size and trading volume. Otherwise, even perfect schemes would be hijacked by powerful interests under the banner of protecting investor interests.

Ensuring healthy development of the market is the duty of the China Securities Regulatory Commission as well as stock exchange operators. But their jobs should focus on making and implementing rules, not making market choices. They should concern themselves with improving the trading system, watching interest groups, ensuring adequate information disclosure, penalizing offenders, and educating investors. These tasks, ranging from the minute to critical issues for certain interest groups, can be easily overlooked. They should not.

In the international arena, successful growth enterprise boards are rare and their development paths are strewn with obstacles. China, as the world’s largest emerging economy, has no shortage of innovative ideas. And the market is active indeed. What China lacks, however, is a system that ensures healthy market function. The less-than-perfect inauguration of ChiNext should sound an alarm for regulators. It is not too late to take corrective action.

Source: Cajing, 10.11.2009 By Hu Shuli

Filed under: Asia, China, Exchanges, News, Risk Management, , , , , , , , ,

China: ChiNext less then 10% of Accounts active

About 9.6 million investors have opened trading accounts on ChiNext, the growth enterprise market that launched on Oct. 30, but only 920,000 have started trading, Yao Gang, vice chairman of the China Securities Regulatory Commission, said on Friday. Many account holders are still cautious about investing, Yao said during a broadcast on the central government website.

Source: Caijing, 09.11.2009

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China: SZSE – ChiNext Creates 13 Billionaires on Paper on First Trading Day

China’s GEM market has given birth to more than a dozen billionaires due to extraordinary enthusiasm of investors.

Strong gains on the opening day of China’s Growth Enterprise Market, the Nasdaq-style board for high-tech startups, have created 13 paper billionaires, Caijing reported, citing calculations based on their declared holdings in the IPO companies.

The biggest individual shareholder in Lepu Medical Technology (Beijing) Co Ltd. (SZSE 300003), general manager Pu Zhongjie, saw the value of his 14.9 percent stake soar to 3.8 billion yuan (US$556 million). The stock rose nearly 119 percent to 63.4 yuan.

The surge in stocks also saw the value of 116 investors’ holdings rise to more than 100 million yuan, Caijing has calculated. The total includes the 13 billionaires.

The other big gainers on the first day included Wang Zhongjun, chairman of Huayi Brothers Media Corp. (SZSE 300027), whose holding of 26.1 percent was estimated to be worth 3.1 billion yuan at the close of trading. The stock rose nearly 148 percent to 70.8 yuan.

Chairman Wang Ning and general manager Li Li of Beijing Ultrapower Software Co Ltd. (SZSE 300002) saw the value of their holdings rise to 1.8 billion yuan each after the company’s stock rose 77.4 percent to 102.9 yuan. Wang and Li each own 13.9 percent of the company.

The so-called “ChiNext” market, the brand GEM is marketed under, began trading at 9:30 am on Friday. Gains by the first 28 companies to list ranged from 76 to 210 percent at the close of the first day.

However, due to China’s volatile stock market and a lock-up period ranging from one year to three years, the wealth of today’s millionaires could shrink substantially. It is very hard to predict how many of them still possess seven-digit wealth in a few years.

Some Brokers Gain Big as ChiNext Issues Soar
Several brokerage firms appear to have made substantial profits from investments in companies listed on ChiNext, the new growth enterprise board that opened last Friday.
According to the ChiNext companies’ shareholders list, some brokerages invested in the firms before the initial public offerings. The China Securities Regulatory Commission approved applications by 15 brokers to invest directly in the companies ahead of the IPOs. On Friday, the companies saw their shares skyrocket, with the 28 stocks registering gains of 75.84 to 209.73 percent.

Click here for pre-trading news., 02.11.2009 by Shen Hu

Filed under: Asia, China, Exchanges, News, , , , , , , , , ,

Shenzhen ChiNext GEM Offline Share Subscriptions Attract 217 Mutual Funds

Offline share subscriptions for the first 28 companies to list on Shenzhen’s Growth Enterprise Market attracted 217 mutual funds. An average of 34 funds participated in each stock listing on the so-called “ChiNext” market, according to data obtained by Caijing.

The biggest single investor was the ICBCCS Enhanced Income Bond Fund, run by ICBC Credit Suisse Asset Management Co., which bought stakes in 23 of the 28 companies.
Full article in Chinese:

» The GEM, which has been branded “ChiNext,” was officially launched Oct. 23, with the first batch of 28 listed companies to commence trading on Friday 30.10.2009

Source: Caijing, 29.10.2009

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