China’s Beijing Stock Exchange index slumps by record 4.2% after bourse seeks to rein in rally deemed excessive
- The BSE 50 Index’s rally of more than 50 per cent in the last month has seen the exchange issue a raft of warnings for abnormal trading
- The 232 companies that trade on the exchange have a combined market capitalisation of US$58.3 billion
An index of small-capitalisation companies trading on China’s smallest stock exchange tumbled by a record amount, after the bourse operator took measures to cool a rally that has sent the gauge soaring by more than 50 per cent over the past month.
The Beijing Stock Exchange (BSE) 50 Index slumped by 4.2 per cent to 1,055.21 on Tuesday, halting a rally that had driven the measure 56 per cent higher since October 23 up to Monday. The decline was the gauge’s biggest single-day loss since its inception on November 21, 2022.
It named Tianjin Kaihua Insulation Material, Hebei Raisesun Information Technology and Hebei Huayang Automobile Gearshift System for unusual share price movements and placed the trio under close observation, according to the statement. Their share prices have surged at least 200 per cent over the past month.
The hot trade on the Beijing exchange comes on the heels of a slew of measures by policymakers in recent months to bolster trading on the mainland’s newest bourse. The State Council, or the cabinet, last week sought to lower the requirements for loan collaterals for companies trading on the exchange, while index compiler China Securities Index said this month that the exchange’s stocks would be eligible for joining the CSI index family next month, a move that is likely to bring capital flows from passively managed funds.
Furthermore, China’s lacklustre economic recovery has also spurred rotation to the Beijing bourse, where the average valuation of companies is less than 2 billion yuan (US$280 million), as punters seek to catch the policy tailwinds.