SMEs eager for funding

GEB launch time unclear

By Wang Xinyuan

The highly-anticipated Growth Enterprise Board (GEB) will address small- and medium-sized enterprises' (SMEs) financing difficulties by giving them more access to investment capital.

It will be better to launch the GEB after other financial mechanisms are in place to prevent excessive buying and selling, Li Kang, chief economist and head of research institute with Xiangcai Securities, told the Global Times yesterday.

"The GEB will increase high-tech SMEs' access to capital. High-tech SMEs will be a major force in the future, so helping them will be making a great contribution to the economy,' Li said.

China Securities Regulatory Commission (CSRC) announced Friday that 149 SME's applications for IPOs at GEB have been accepted for review. The total capital to be raised is estimated to be 33.6 billion yuan ($4.9 billion).

The majority of the 149 IPO applicants at GEB are privately-owned. About 9 percent, or 13 enterprises, are State-owned, and 8 percent, or 12 applicants, are foreign-invested enterprises, according to the CSRC.

Two-thirds of the applicant enterprises are located in Beijing, the Yangtze River Delta and South China's Pearl River Delta, according to Shanghai Securities News.

Nearly 80 percent of the enterprises are in information technology, new materials, biomedicine, new energy, agriculture, and the service industries. Only 13 percent of the applying enterprises are focused on manufacturing, much lower than the 70 percent of companies listed on the existing SME board.

The existing SME board is only a subset of the main board, and meeting the requirements for getting listed is still too difficult for most SMEs, said Li of Xiangcai Securities.

However, by adding a new supply of stocks, the GEB IPOs might temporarily depress overall market performance by luring capital off the main board, said Li.

But not all analysts agree. The first eight to 10 IPOs on GEB will raise an estimated 2 billion yuan ($29.3 million), so they shouldn't have much effect on the main board, said Li Daxiao, head of the research institute with Yingda Securities.

It should take about two weeks to get CSRC's approval for an IPO on GEB, according to a Dongguan Securities report cited by Information Times.

It is still uncertain when GEB will be launched. Li of Xiangcai Securities added that it would be better to launch GEB after stock index futures and margin trading, which allow investors to sell short, are permitted. Once the short-selling is available to mitigate risks for investors, the overall stock market will be more stable in the long run.
 

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