November 23, 2015 / 5:36 AM / 4 years ago

New high-tech OTC board to launch in Shanghai this year

SHANGHAI, Nov 23 (Reuters) - The Shanghai Equity Exchange (SEE), operator of the city’s over-the-counter equity market, said on Monday it has received regulatory approval to launch a hi-tech board for innovative start-ups, and plans to list the first firms by the end of this year.

Launch of the so-called “technology innovation” board is part of China’s efforts to build a multi-layered capital system, and is aimed at easing funding shortages for small-and-medium sized firms in the technology and innovation sectors, the exchange said on its website.

China has been counting on innovation and consumption to revive its slowing economy.

The Shanghai Equity Exchange is an OTC market similar to the U.S. OTC Bulletin Board which caters to non-public companies that lack the collateral for bank loans and do not have the scale or the motivation to join the long queue to list on the main bourses.

It competes with a similar board in Beijing, the “New Third Board” over-the-counter market that has been favoured with policy advantages over other OTC rivals.

The new board should also allow Shanghai to better compete with the popular ChiNext small-cap growth board in Shenzhen.

Shanghai-based Chinese business daily China Business News, quoting the SEE’s director of innovation Chen Yanyan, said more than 50 companies are already queued up to list on the so-called Tech Innovation Board when it launches.

China has established three layers of share trading systems in the primary Shanghai and Shenzhen stock exchanges — the main board for mature companies, the SME board for small- and medium-sized enterprises and another board, or ChiNext, for start-ups.

However, Shanghai was widely seen as losing competitiveness due to its focus on massive listings by state-owned companies at the expense of smaller “new economy” stocks, which are mostly listed in Shenzhen.

It has also built up a series of OTC markets where ownership in non-public companies can change hands, but until recently they were regionalised in nature, lacked clearing mechanisms or attractive companies, and thus failed to attract trade.

China’s securities regulator on Friday said it would release measures to further promote the development of the New Third Board.

Shanghai will also launch an equivalent of Shenzhen’s ChiNext board on its own exchange. (Reporting by SHANGHAI Newsroom and Brenda Goh; Editing by Kim Coghill)

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