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Securities Firms Brace for GEB Arrival

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Chinese stockbroking firms are getting ready for the imminent launch of the NASDAQ-like growth enterprise board (GEB) in Shenzhen.

Talent and the quality of the listing candidates are the two factors that could be considered vital for the GEB's success, said experts.

"We have dozens of companies in the pipeline and are ready to submit the application forms when the regulator gives the final clearance," said Cai Tiezheng, general manager with the investment banking department of GF Securities.

China's securities regulator released the broad guidelines for the GEB, effective May 1, but marketmen are still waiting for some more specific regulations.

"We are looking for the specific listing and trading regulations from the Shenzhen Stock Exchange, which will specify the requirements for refinancing, delisting, etc," said Cai.

Securities firms have said that they would remain cautious in their approach to the proposed GEB than when the idea was first broached a decade ago. Many of them have back-up plans for potential candidates, which also meet the listing requirements of the small and medium-sized enterprises (SMEs) board.

"We will select the proper channel for companies to get listed after the specific regulations come out," said Cai.

The proposed GEB is expected to present securities firms, especially those that have direct investment business, with greater opportunities for high-profit-margin businesses.

CITIC China Securities and China International Capital Corporation (CICC) were in the first batch to get the licenses to do direct investment business in 2007. So far, nine brokerage firms including Haitong Securities, Huatai Securities, Everbright Securities, GF Securities, Guotai Jun'an Securities, Guoxin Securities and Pingan Securities have got approval for direct investments.

Enticed by the higher profit margins, many more brokerages have also taken steps to be a part of the new business.

"We have delivered the application form to the regulators and are expecting to widen our business scope," said Zhou Honggang, deputy general manger with the investment banking department of Hongyuan Securities.

Besides securities firms, accounting firms and law offices also beneficiaries of the upcoming GEB.

"May is usually an off-season for accounting firms, as the annual audit work finished in April. However, we're as busy as in the peak season and about 60 companies that targeted to get listed on the GEB have applied for financial review," said Hu Chunyuan, managing partner with Guangdong Dahua Delv Certified Public Accountant Firms.

"Nine out of the 10 companies are from the Pearl River Delta or the Yangtze Delta regions, where a lot of SMEs are located," said Hu.

(China Daily May 5, 2009)