The Shenzhen Small and Medium-sized Enterprises (SME) Board is expected to list the first batch of companies since the government lifted a year-long ban on initial public offerings (IPOs).

 

Sources close to the securities regulator said that five SMEs including Hengdian Group DMEGC Magnetics Ltd Co, Shenzhen Tongzhou Electronic Ltd Co and China CAMC Engineering Co Ltd have handed their IPO plans to the China Securities Regulatory Commission (CSRC).

 

China lifted its year-long ban on IPOs two weeks ago after adopting new regulations relating to IPOs on its stock markets.

 

CSRC chairman Shang Fulin said yesterday that it would continuously build up the Shenzhen SME Board, also called the second board, as a long-term strategy to bring China's securities market more in line with international standards.

 

"The SME board is a significant procedure for China to establish a multi-level capital market," Shang said at yesterday's 2006 Financial Summit, held as part of the Ninth China Beijing Hi-tech Expo. "China should construct a capital market that will meet diversified finance and investment needs," he said.

 

However, analysts pointed out that allowing SMEs to first go public on the Shenzhen SME Board after the year-long ban will not cause big fluctuations in the securities market.

 

"SMEs usually issue limited A shares due to their small size, so it is not likely to cause big market fluctuation," Cheng Weiqing, an analyst with CITIC Securities, said.

 

If approved by the CSRC, Hengdian Group DMEGC Magnetics Ltd Co is expected to issue 60 million A shares, Shenzhen Tongzhou Electronic Ltd Co will issue 30 million A shares, and China CAMC Engineering Co Ltd will issue 80 million A shares on the Shenzhen SME Board.

 

Chen Hongqiao, deputy general manager of the Shenzhen Stock Exchange, said last Thursday that the resumption of IPOs would bring fresh blood to the Shenzhen SME Board.

 

Currently the SME board has only 50 listed companies, although the country has many fund-thirsty SMEs eager to enter the market.

 

All 50 companies on the Shenzhen SME Board finalized the non-tradable State share reform in November.

 

In January, the Shenzhen Stock Exchange issued new rules to guide listed firms on the SME board to tighten the supervision of listed SMEs to better protect small shareholders.

 

Small shareholders of listed SMEs are expected to play a more important part in the decision-making process, such as the election of directors and supervisors, according to the rules.

 

To protect investors in those listed SMEs, the Shenzhen Stock Exchange would establish a database to collect and disclose information about listed firms, such as those firms' related parties and their investment activities.

 

The exchange will also build a website to provide a consulting service for public investors on legal issues.

 

(China Daily May 24, 2006)