SHANGHAI (Reuters – Monday saw trading on Beijing Stock Exchange. The shares of the 10 Chinese companies that have recently done initial public offerings on Chinese bourses surged up to sixfold, triggering circuit breakers.

A total of 81 stocks started trading https://www.reuters.com/article/china-exchange-idUSL1N2S30M3 to mark the official launch of the exchange – which has been set up to serve small and medium-sized enterprises https://www.reuters.com/article/us-china-stocks-exchange-idUSKBN2HK0E7 (SMEs), underpinning President Xi Jinping’s “common prosperity” policy aimed at reducing wealth gaps in the country.

It’s an impressive performance, especially for the first day. Yang Hongxun of investment firm Shenguang, said that she doesn’t think there is much “froth.” “I see very little likelihood of the market collapsing with President Xi’s endorsement of the exchange.”

Other 71 stocks performed mixed, and were transferred to new bourses from Beijing’s New Third Board’s select tier.

Yi Huiman is the chairman of China Securities Regulatory Commission (CSRC). He said the Beijing exchange launch was a major milestone in China’s capital markets reforms.

Yi stated that it was important because it will improve multi-layered capital markets and financing system for SMEs. It will also drive innovation and boost China’s economy.

Beijing’s exchange will complement existing Shenzhen and Shanghai bourses that are home to larger market capitalisations.

More than 4 million people have created accounts in Beijing to trade on the Stock Exchange. It adopts a registration based IPO scheme – a method also embraced and supported by Shenzhen’s ChiNext as well Shanghai’s tech-oriented STAR Market.

CIRCUIT BAKER

Companies listed in the first round of the bourse mainly come from software, high-end manufacturing and pharmaceutical sectors.

Ten stocks newly approved for listing were where most of the buying was concentrated. Listing of the remaining stocks had been long expected and was therefore heavily priced in.

Oriental Securities reports that Henan Tongxin Transmission Co (which makes automobile transmission designs) was the most successful gainer. The company climbed 504% in morning traders.

Nantong Great Electric Co Ltd nearly tripled, and HeBei Raisesun Information Technology Co gained 280%.

These spikes activated circuit breakers and caused temporary halts to trading in 10 of the stocks.

These 10 stocks can move daily at their maximum on the first trading day. However, moves in any direction after that will not exceed 30%.

Analysts said that whether the rally will be sustained is dependent on the fundamentals within the companies.

According to the official Securities Times, the average earnings multiplier of the 81 companies was 36, excluding one loss-making company.

Compare this to price/earning ratios at 71.84 Shanghai’s STAR Market or 60 Shenzhen ChinNext.

The newspaper reported that the average net profit growth among the 81 companies included on the new exchange was 18.9%, which is almost 10 percentage point higher than the Chinese offshore stocks.

Investors who have assets of at least 500,000 yuan (78,347) can trade on the Beijing Stock Exchange – a level comparable to Shanghai’s STAR Market.

Expect more cash to come in.

According to CSRC, eight mutual funds that target the Beijing exchange were registered.

($1 = 6.3819 )