New Third Board firms nudged to ChiNext

China is encouraging companies listed on the New Third Board to go public via the ChiNext board, although there may be difficulties in implementation, experts say.

The National Equities Exchange and Quotations, also known as the New Third Board, is China's third national equity exchange. It is popular among micro businesses up to medium-size companies. As of Feb 21, 10,675 companies were listed on the board.

Liu Shiyu, chairman of the China Securities Regulatory Commission, said in February that the New Third Board should play the role as "soil" and "nursery" to help qualified liste companies go public on the A-share market.

The Shenzhen Stock Exchange said after Liu's speech that it would deepen the reform of the ChiNext board - a NASDAQ-style board of the Shenzhen Stock Exchange - and positively promote the pilot program of qualified New Third Board-listed companies going public via the ChiNext board.

Zhu Haibin, chief analyst of the New Third Board at Essence Securities Co, says: "The pilot program is important for perfecting the construction of China's multilevel capital market. The New Third Board used to only receive companies delisting from the A-share market, and now it can help companies listed on the board to go public via Shanghai and Shenzhen bourses."

But Zhu says the system design is still difficult for New Third Board-listed companies going public in the A-share market. It is also a challenge for them to be treated as equals to those already lining up for IPO approval. By Feb 9, there were 718 companies applying for IPO examination and approval, CSRC data show.

"But it is cheering news that Chairman Liu Shiyu made a speech in February to solve the problem of a long queue for mainland IPO approvals within three years," Zhu says.

A source close to the NEEQ who asked not to be named tells China Daily that it is challenging for New Third Board-listed companies to disperse shareholding if they want to relist.

"The average shareholder number of the New Third Board-listed companies is only a few dozen, which is far lower than that of the A-share listed companies," the source says, adding that it was also unclear whether the New Third Board-listed companies should meet current stock exchange listing requirements.

Hu Xiaohui, chief strategist at LC Securities, however, expresses confidence in the companies relisting via the A-share market.

"As long as the problem of a long queue for IPO approvals is solved, the implementation can be smooth," Hu says.

"I expect the total IPO amount this year will be far more than last year, benefiting from the New Third Board-listed companies' relistings."

caixiao@chinadaily.com.cn

(China Daily European Weekly 03/03/2017 page28)