As of Sunday, the new bourse has been established. It released key rules including listing and investment thresholds, and has run two technical tests to get market players ready for its trading commencement. The bourse is yet to specify the date of market opening.
Listing requirements and trading rules of the Beijing bourse are friendlier to SMEs than those of its Shanghai and Shenzhen peers. It is also more inclusive of the companies' greater development uncertainties and stock price fluctuation.
As an example, the BSE requires a minimum valuation of 200 million yuan for applicants to be listed, much lower than the 1 billion yuan minimum valuation threshold of the STAR Market and the ChiNext board.
Experts said the new bourse will not only make it easier for SMEs to float shares, but also facilitate the financing of smaller firms yet to become qualified for IPOs, especially those traded on the new third board.
The new third board, officially known as the National Equities Exchange and Quotations, is a national equity trading system that debuted in 2013 but was not deemed as an exchange market. It has suffered from lukewarm liquidity condition, voluntary exits of firms, and relatively poor functioning of financing.
The Beijing bourse was founded based on the NEEQ Select, the highest tier of the new third board, which means all of the 66 NEEQ Select-traded companies will become BSE-listed firms.
Share prices of the 66 firms surged by an average of 39.01 percent in the week following China's announcement to set up the exchange, according to Essence Securities.
Additional companies to be listed will come from those previously traded on the Innovation tier, the NEEQ's second-highest tier, for 12 consecutive months. They must also meet BSE's listing requirements. Companies on the Innovation tier in turn come from qualified ones on the NEEQ's lowest tier, the Base tier. Some companies enter the Innovation tier directly.
Li Zhenhua, a partner with private equity fund management platform Cloudview Capital, said the accessible exit channel provided by the BSE will motivate more investments in smaller firms, benefiting the more than 7,000 NEEQ-traded SMEs.
According to Li, though the STAR Market and the ChiNext board receive IPO applications from NEEQ Select-traded companies, few of them have actually gone public on the boards. That is because the listing requirements remain strict for them, which in turn limit private equity and venture capital funds' interest in the NEEQ system.
"Now the BSE has allowed enterprises at an earlier development stage and of a smaller scale to get listed, expanding the exit channel for PE and VC funds' investments in those companies," Li said.
This will boost investors' interest in smaller firms and therefore facilitate the financing of SMEs, especially those within the NEEQ system, he said.