The growth enterprise board (GEB) is not expected to pose a strong challenge to China's main board due to its limited financing capital, even though there are temporary concerns on liquidity, industry experts said.

The China Securities Regulatory Commission (CSRC) yesterday said the long-awaited GEB for start-ups to raise capital would start from May 1.

"Given the typical high trading volume in global growth board markets, the launch of GEB will attract much attention and some capital from the main board in the short-term. The shortage of financial products in China has also made investors enthusiastic about innovations like this," Jerry Lou, China strategist at Morgan Stanley.

But he said the new board would not compete with the main market in the long run as it mainly targets investors with a much higher risk appetite.

With a lower listing threshold compared to that on the main board, the much smaller board is highly unlikely to gather huge amounts of capital. A firm's share capital must exceed 30 million yuan after listing.

"We estimate each listed firm on the new board will probably raise about 200 million yuan in capital. Therefore, the capitalization of listing 100 such firms would only approximately equal one heavyweight on the main bourse," said Mao Nan, analyst, Orient Securities.

Besides, with the authorities taking a cautious approach, small-sized listings in the early stages are likely to be slow, therefore, the diversion of funds from the main board may be insignificant," said Jing Ulrich, managing director of China Equities at JPMorgan.

However, Chen Siyu, analyst with Guotai Junan Securities, said the GEB would temporarily put liquidity pressure on investors, as the newly listed small firms are likely to catch the fancy of short-term punters.

The mainland stock market rallied 0.64 percent to close at 2373.21 points yesterday. The venture capital investment concept sector rallied 3.65 percent in active trade, led by CCID Media Investments, which surged to its daily caps of 10.04 percent.

(China Daily April 1, 2009)