China’s Latest Stock Exchange

ChiNext is China’s newest stock exchange catering to innovative start-ups and growth companies looking for financing where traditionally it has been difficult. Chinese stars like Baidu and Ctrip were unable to find investment at home and had to turn to the NASADAQ market in the US for capital. ChiNext hopes to change that. The premier bourses the Shanghai Stock Exchange and the Shenzhen Stock Exchange have dominated listing in heavy weight State Owned Enterprises (SOE’s) and ChiNext will give a much needed boost to tomorrow’s rising stars.

After 10 years in the making ChiNext debuted October 30, 2009 with the listing of 28 companies raising between USD60 million for Lepu Medical to as little as USD6 million for Huaxing Chuangye. The UK’s second tier Alternative Investment Market (AIM) only lists companies that raise at least USD100 million so ChiNext could be a viable alternative to non-Chinese firms seeking smaller amounts of capital too.

ChiNext is what is known as a Dealer Market where dealers are assigned to buy and sell securities from their own inventory. They are required to show minimum size bids and offers and are obligated to fill a certain quantity of orders as well. At the time of this writing specific dealer obligations are not known.

The first day of trading was as some feared very volatile. Trading was halted for 30 minutes at least once after securities rose 20 percent over their opening prices. Trading is also halted again for 30 more minutes if names move 50 percent. There were over 1.4 million orders filled and more 400 million shares traded hands valued at around USD3 billion. To put that into perspective the Stock Exchange of Hong Kong averages about 667,000 trades per day worth approximately USD7.7billion.

There are 3 other small cap exchanges in Asia; Hong Kong’s Growth Enterprise Market (GEM), Japan’s Market Of The High-growth and Emerging Stocks (MOTHERS) and the Gre Tai Securities Market in Taiwan.