GEM TO PROVIDE NEW CHANNEL TO RAISE CAPITAL
May 08, 2008 | BY
clpstaff &clp articles &When the China Securities Regulatory Commission [CSRC] recently released the Draft Measures on Administration of Initial Public Offering and Listing on…
When the China Securities Regulatory Commission [CSRC] recently released the Draft Measures on Administration of Initial Public Offering and Listing on the Growth Enterprise Market, it outlined how small enterprises in the mainland will have the opportunity to be listed as the GEM.
The Growth Enterprise Market (GEM) played a key role in the economic aims announced by Premier Wen Jiabao during the recent National People's Congress.
“We believe that under [the current] system, the PRC GEM market will turn out to provide a remarkable opportunity in the long run,” says Lawrence Guo, partner at Broad & Bright.
“From a macro perspective, the GEM will complement the existing main broad market in the Shanghai Stock Exchange and Shenzhen Stock Exchange, as well as the middle and small-size enterprise broad in Shenzhen,” Guo adds.
Tony Zhong, partner at Haworth & Lexon, says the state of the capital markets in the mainland is in much shape than in previous years, yet he says both the legal and practical conditions still play a crucial role for the opening of the mainland GEM.
Run by the Shenzhen Stock Exchange, the GEM aims to widen the opportunities available to small enterprises' to sell stock and raise cash. According to Guo, the draft GEM measures require lower thresholds than those on the main board market.
“The requirements set by the bank are definitely high if the small private-owned enterprise get loans,” Zhong says. “The GEM will be of great benefit for small enterprises that have good growth prospects.”
However, since the GEM involves a relatively high risk investment, risk management is essential for clients to take note of, Zhong says. Besides, small enterprises might face difficulty in getting approval from the CSRC.
“There will be too many companies that would want to seek a GEM listing. Out of the CSRC's policy considerations, a company engaged in a high technology or innovative industry [may] have a better chance of obtaining a CSRC approval,” Guo says.
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