Shares on China’s two-year-old Beijing stock exchange were set for their best week, and turnover rocketed to record highs as investors took heart from policy measures to improve a market that focuses on smaller innovative tech firms.
The Beijing Stock Exchange 50 Index jumped more than 13% so far this week, with daily turnover hitting 10 billion yuan this week, marking roughly a ten-fold jump over the daily average turnover in previous weeks.
The Beijing exchange, launched two years ago, was endorsed by President Xi Jinping with a mandate to fund innovative small companies called “little giants” that specialise in niche sectors.
The rally comes after the China Securities Regulatory Commission (CSRC) said in September it aimed to boost liquidity in the market by relaxing investor thresholds and improving trading mechanisms, while guiding more mutual funds to expand their investments in the market.
Since a recent bottom in October, the Beijing stock index has jumped more than 30% so far.
“The policy package may bring in incremental funds for the market,” said Zheng Zichun, macro strategist at the wealth management department of Huaxi Securities. “Some investors are taking advantage of the policies to speculate on stocks in the market.”
Shares listed on the Beijing bourse have an average market capitalisation of 1.4 billion yuan, roughly one thirteenth of the average for shares listed on the main boards of the Shanghai and Shenzhen exchanges.
Such small stocks could easily be lifted by small amount of capital, and they have shone this year, while the broader market has put in a weak performance as China has made a wobbly post-pandemic economic recovery.
Shanghai-based fund manager Li bought Beijing exchange stocks earlier this week, expecting a speculative surge to fuel the rally for another one or two weeks.
“The surge in the market would attract more money inflows,” he said, only giving his surname.
Beijing-listed Wuxi Yoshioka Precision Technology Corp has jumped 78% so far this week, while shares in Hebei Huami New Material Technology and Sanmen Sanyou Technology Inc soared more than 50% each.
Zhou Yunnan, founder of NS Capital Co, warned the rally may face a correction soon.
“They jumped too much in recent months, and the sharp surge in turnover means potential profit-taking might be imminent.”
Han Li, fund manager at Shanghai Star Fund Management said he doesn’t invest in the Beijing shares, citing “poor liquidity in the market and weak fundamentals in the companies”.
“The rally is hard to sustain,” he said.
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