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GEM Will not Impact on the Main Board: Expert
China has possessed the condition for the establishment of the Growth Enterprise Market (GEM), or the second board market, and the launch of GEM will not give rise to sharp fluctuations in the stock market, Xiao Zhuoji, a renowned economist said at the Conference of the World Sci-tech City Union held recently.
According to his analysis, the Chinese economy is at a fast development stage. Residents have large amount of private assets, which are still increasing. This is an important economic condition for the establishment of the GEM.
Currently, the value of personal financial asset of the Chinese residents is estimated to be around RMB 10 trillion, RMB 6.6 trillion of which is in the form of bank deposits. The capital in the stock market is some RMB 1 trillion, accounting for only a smaller proportion.
Under such circumstances, the establishment of the GEM will provide the public with a new investment channel. Furthermore, through ten years of development, China's stock market has achieved considerable progress. It has exceeded Hong Kong both in the number of listed companies and the average daily trade volume.
The capital market has provided a large amount of capital for listed companies, which has played a big role in the development of these companies. Last year, the stamp tax revenue from the stock market was RMB 24.4 billion, surpassing RMB 23.2 billion of agricultural tax paid by China's 900 million farmers.
The stamp tax for stock trading levied in the first half year reached RMB 26 billion, surpassing that in the same period last year. RMB 50 billion is expected for the whole year.
Currently, more than 50 million people are participating in stock trading in secondary market. The investors have gradually identified with the capital market, and the number of institutional investors is growing continuously.
All these have created sound condition for the launch of the GEM.
Xiao was not worried that the launch of the GEM would impact on the main board market. He said if 100 enterprises get listed on the GEM in the first batch, each issuing 20 million shares on average with a price of RMB 10, the total market value of the negotiable shares of the GEM is RMB 40 million (supposing the share price doubles after issuing on the secondary market), which is very little when compared with that of the main board. It not only will not have great impact on the main board, but also are likely to promote each other with it. Meanwhile, as the GEM is established basically in line with international practice, it will also set a good example for the reform and development of the main board market in future. It is an important form of the standardization of China's capital market.
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