Shenzhen’s Start-Up Board Needs ‘Rational’ Investors, Song Says

Published on July 4, 2009 by brooks | This story has been viewed 197 times

uly 4 (Bloomberg) — China’s investors need to take a “rational and mature” approach to trading companies on the proposed Nasdaq-style start-up board, Shenzhen Stock Exchange President Song Liping said.

“Companies on the start-up board have higher growth and risk and will require sharper judgment from investors,” said Song, who spoke at a forum in Shenzhen today. “We hope investors can understand the unique characteristics of start-up board companies and invest rationally.

Institutional investors should increase their research into these companies and play a bigger role in determining market prices, she said. The board will provide small businesses another avenue to seek financing and promote the development of the private equity market, Song added.

The China Securities Regulatory Commission issued draft rules in March making it easier for start-ups to list their shares on a planned Nasdaq-like stock exchange.

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Under the draft rules, listing candidates need to have been established for three years and have reported an annual profit of at least 10 million yuan ($1.5 million) in the previous two years. Alternatively, they must have posted net income of 5 million yuan in the previous year and had sales of more than 50 million yuan and annual sales growth of more than 30 percent.

The securities regulator followed up by issuing rules for investor education on the start-up board on July 1. Last month, the regulator proposed a rule that would require those with less than two years of investing experience to sign a statement saying they’re aware of risks before buying shares in start-ups.

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