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Likely May launch for GEM as start-up firms get ready to list

THE first Nasdaq-style board for smaller start-up companies on the Chinese mainland is expected to be unveiled in May, industry sources told Shanghai Daily.

The growth enterprises market, or GEM, in Shenzhen is likely to be launched in May and several companies are in the line-up and preparing to be listed on it, said an industry veteran who declined to be named.

Another source earlier told Shanghai Daily that the State Council will give the go-ahead for the board and for the trading rules in March.

The long-awaited GEM board is part of the central government's measures to bolster the economy by opening more capital channels to smaller businesses. The May launch of the GEM is the culmination of three years of preparations.

The Nasdaq-like board will have lower listing thresholds than the main boards in Shanghai and Shenzhen. Brokers are already helping potential firms to list on the GEM.

"One of my clients is considering listing on the GEM from the board in Shenzhen," an unnamed lawyer in Shanghai said yesterday. "The GEM board has a lower listing threshold but poses bigger uncertainties."

Listing candidates must show two straight years of profit with combined earnings of at least 10 million yuan (US$1.46 million). By comparison, firms that list on the main boards must post a profit for three years in a row, during which collective earnings must be at least 30 million yuan.

"The GEM board is definitely a help in opening more corporate financing channels but it must be managed cautiously," said Huang Fuxing, director of the securities and futures center under the Shanghai Academy of Social Sciences.

Huang said that there should be stricter rules on brokers who act for individual investors keen on buying shares of start-up firms that are to be listed on GEM to curb risk exposure.

"Start-up companies generally enjoy big growth potential and high risk exposure," Huang said. "If they go bust, the impact on individual investors will be huge."


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