A grand inauguration ceremony to launch Shenzhen Stock Exchange’s small and medium-sized enterprise (SME) board was held yesterday afternoon, and shortly after its opening privately funded Zhejiang NHU Co. Ltd. announced the first initial public offering on the new board.

Officials from the central, provincial and municipal governments rubbed shoulders at the ceremony with leading securities regulatory officials.

 

Zhejiang NHU, based in east China’s Zhejiang Province, will issue 30 million shares. With an issue price of 13.41 yuan (US$1.62) per share, the stock bears a price/earning ratio of 16.35.

 

The flotation is expected to raise 400 million yuan (US$48.4 million). The proceeds will be used to support its business expansion and technological upgrading, according to the company’s prospectus.

 

The high-tech firm, with total assets of 1 billion yuan (US$120.8 million), produces a wide range of products including medicine, health-care products, flavorings and food additives.

 

Its annual sales could reach more than 1 billion yuan, the company said on its website.

 

National People’s Congress Standing Committee Vice Chairman Cheng Siwei said during the ceremony that guaranteeing the quality of the firms on the new board and strict supervision of them must be top priorities.

 

“The listed companies should ensure the consistency, timeliness and accuracy of their financial reports, while the stock exchange has the responsibility to create a fair, open and just market,” Cheng noted.

 

China Securities Regulatory Commission Chairman Shang Fulin said the board will be open to growing SMEs with outstanding main businesses and innovative high-tech start-ups.

 

The monitoring and supervision system will be extremely strict to ensure the new board’s smooth operation, Shang added.

 

The commission announced its long-awaited decision of the launch of the SME board, a de facto embedded subordinate of the main board of Shenzhen Stock Exchange, last Monday, paving the way for a completely independent NASDAQ-style market in the future.

 

Zhejiang NHU’s IPO will be the first on the Shenzhen bourse since late 2000, when it was ordered to stop hosting IPOs. It surrendered them to the Shanghai Stock Exchange as part of its preparations for the NASDAQ-like second board.

 

The SME board will run semi-independently, with its own index, trade code and supervisory system.

 

Companies that seek listings on the new board will have to meet the same requirements demanded by the main Shanghai and Shenzhen exchanges. For example, entrants are required to show a three-year profit record.

 

Officials said that more than 1,000 companies hungry for funds have joined the IPO queue, helping the dynamic southern boomtown of Shenzhen revive its flagging financial fortunes after being overshadowed by Shanghai in recent years.

 

The commission has accelerated the approval for the nearly 50 companies qualified for listing on the SME board. They will float fewer than 50 million publicly traded shares each. It is believed that spreading the number of shares traded on the board over a number of companies will mitigate the risk that a single one may attract too much capital.

 

The exchange is expected to debut 10 stocks in early June.

 

(China Daily May 28, 2004)