GEM board getting the cold shoulder

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The GEM Board is coming soon. However, investors do not seem to have much enthusiasm for it. So far, less than 200,000 investors have applied for trading accounts on the GEM board.

Chinese investors are normally willing to participate in trading new shares. However, brokerages have found that only a few clients have shown interest the GEM board, despite a series of promotions.

Li Xiang, Consultant of Dongxing Securities said "So far, only one percent of our clients have opened accounts on the GEM board. Many are asking for information about it, but few of them have taken action."

A similar situation was seen in other securities brokerages. Statistics from the Shenzhen Stock Exchange show that less than 200 thousand investors have opened G-E-M board accounts. The number is just 10 percent of the amount that was previously expected. This is because many individual investors are cautious about risks in the new market.

Investor said "I'm not choosing the GEM board, because there is too much risk. The GEM board is extremely risky."

Market insiders say investors' cold shoulder to the G-E-M board is due to the higher range for price fluctuations. Prices for shares listed on the G-E-M board are allowed to fluctuate by 20 percent each day, while those on the current A share markets can only change by 10 percent each session. Meanwhile, stocks that preform poorly risk being completely wiped out from the board. This has added to the doubts for investors. As a new market, the G-E-M board will not become attractive until it shows enough profitability.

Zhao Xijun, Deputy Director of Finance & Securities Inst., Renmin University said "When the SME board was newly introduced, there wasn't much enthusiasm among investors either. So the key issues are standardized operation, sound management, and a good return to investors."

Experts also point out that as companies listed on the GEM board are new-comers to the market, their profitability and future are uncertain. But opportunities always go along with risks. Taking Microsoft as an example, the company transferred to the main board market after it succeeded in the Nasdaq market. They also say that China's structural adjustment to the economy will provide more development opportunities for newly emerging industries. This means the GEM board should have more room to grow in the future.