The countdown to the start of GEM trading is underway. Many investors have great expectations for the GEM. Some insiders believe the opening of the GEM is a milestone, but establishing a mature GEM will be a difficult task.
The GEM will begin trading on 30th this month. Many investors have opened accounts specifically for the GEM, hoping their favorite GEM enterprises may bring them prosperity. But how to choose between the first batch of 28 GEM enterprises is a tricky decision for them.(www.hXen.com)
Zhang Gang, an analyst with Southwest Securities, says the growth enterprises' market environment is very different from the main board. Most GEM enterprises don't have a long history, making it hard to evaluate their value. Zhang Gang suggests investors should pay close attention to the core competitiveness of the enterprise.
"Most GEM enterprises are high-tech enterprises which are mainly engaged in hardware and software. For enterprises in the hardware business, the growth of their market value can be optimistic if their technology is taking the lead in the industry. For those in the software business, their performance is mainly determined by their market share."
Just as stock holders flock to invest in new enterprises on the market, the GEM is no exception. The stock holdings amongst the 28 GEM enterprises total hundreds of millions of RMB.
Some big stock holders may choose to sell their stocks after they have made enough from them. Senior official Dai Guoqiang from the Ministry of Science and Technology, says the GEM's trading system has taken precautions against this.
"There is a 12 to 36 months lock-up period in this trading system, allowing them to better focus on running their business."
As well as protecting investors' rights and avoiding speculation, administrative departments have introduced other regulations specifically for GEM trading, such as the ruling that trading will be suspended if an enterprise stock price going up or down by more than 80 percent.
Whether the two trillion yuan in frozen capital gathered so far in the GEM's application period will bring another windfall is a big question. Zhang Jingdong, analyst with Dongxing Securities, says:
"Whether GEM can continuously attract investment mainly depends on if GEM stock prices keep rising after the trading starts. However, because the estimated value of many GEM stocks is way higher than they should be, on average, 55 times higher, it is too much to compare to the main board. Under such circumstances, it's very hard for GEM stocks to maintain strong growth."
Other experts also reveal that strict implementation of trading regulations and administrative department's supervision is hugely important for the maturing of China's GEM.
