Briefing: China’s regulator screening small investors from new tech board

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China’s regulator urges brokerages to monitor investors’ funding needs to trade on Nasdaq-style market – South China Morning Post

What happened: The China Securities Regulating Commission asked brokerages to ensure that investors in the new Technology Innovation Board have a minimum investment capital of RMB 500,000 ($72,900), SCMP reported. The move is intended to shield the new Nasdaq-style stock exchange from small players; an estimated 85% of Chinese investors do not meet the capital requirement. Brokerages will also be required to check the origin of funds deposited in trading accounts. The SCMP found that, as of Monday, 108 tech firms had submitted applications to list on the Shanghai Stock Exchange.

Why it’s important: The new board is a momentous reform to China’s capital market. For the first time in history, unprofitable companies will be allowed to list on Chinese stock exchanges. This change will support the up-and-coming startup sector but may also create significant share price fluctuations, which could translate into high losses for small investors. Stocks listed on the new board will be allowed to trade freely for the first five days, and then will face a 20% upside or downside limit.