The CSRC's (Chinese Securities Regulatory Commission) special advisor believes that the State Council is waiting for global economic conditions to stabilize before announcing the launch date of the Shenzhen-based board, popularly dubbed the Growth Enterprise Board.
He also says that the government wants to be satisfied that, "The CSRC is basically on top of its work regarding regulation. I don't anticipate an announcement until we are nearer the time of the State Council's annual financial sector review meeting, presently slated to take place in November.
"A true second board will be some time in coming, but some progress has been made," he adds. "An amendment to the Companies Law in December 1999 allows high-tech companies to list and draft regulations have been finalised for a few months now."
In preparation for the board, the Shenzhen Stock Exchange has already devised a new dealing system and accepted no new listings from any company since October. Eventually, it is envisaged that all companies listed on the Shenzhen main board will be re-located to Shanghai.
In comparison to the main board, dominated by state-owned enterprises (SOE's) Neoh says that the vast majority of companies waiting to list on the second board are privately-owned. He also underlines that stringent listing rules require a minimum capital of RMB20 million, of which RMB8 million has to be net material worth.
"This is more than Hong Kong GEM requirements and equivalent to Nasdaq requirements," he stresses. "There are now over 300 companies which have entered the securities firm tutelage process with over RMB10 million in net worth. Over half have substantially more and nearly all have profit records."
In terms of eligibility, companies will be expected to disclose expert reports and other materials to demonstrate their high-tech credentials. Neoh says that the National Academy of Sciences and the Ministry of Technology have put together a panel of academics and other experts that will be able to provide companies with reports.
With the launch of a second board and development of plans for a third housing de-listed SOEs, China's domestic markets are burgeoning. "In time we shall have a fully tiered market," Neoh concludes, "But this will take a few years as the supervisory and enforcement ability of the regulators must settle down to a consistently high standard."
