The countdown of public offering investment in the new third board

 The countdown of public offering investment in the new third board

Public offering has been prepared in advance

On January 7, the new three board market making index rose to 1004.71 at the beginning of trading, and then fell 0.31% to 987.14 by the end of trading. On January 6, the new three board market was more powerful. By the end of trading on January 6, the new three board market making index rose 3.82%. At the level of individual stocks, wind data shows that from January 6 to 7, individual stocks have risen by 50% in two trading days, and 25 stocks have risen by more than 20%. For a long time, in the six trading days after the release and implementation of the first seven pieces of business rules related to comprehensively deepening the new third board reform on December 27, 2019, there were doubled shares, and 11 shares increased by more than 50%.

The guidelines issued on January 3 mainly include clarifying the participation requirements of fund managers, standardizing the scope of fund investment, liquidity risk management, standardizing the valuation of public funds, information disclosure and risk disclosure, and investor suitability management. In this regard, some public fund companies have made relevant preparations for participating in the new third board investment in advance.

Such products are being planned. At present, we are communicating with the investment research team, and also require all departments of the company to prepare for personnel, system, valuation and risk control in advance. Boshi fund related people said. A person from a fund company in Beijing also said: we are preparing to report relevant products.

After the new three board policy channel is opened, we will focus on it. The manager of a public fund in southern China said that whether it is the science and technology innovation board, the new third board or Hong Kong stocks, they are all channels for investors to buy shares. We focus on buying quality companies at a reasonable price. If there are some high-quality companies in the selection layer, it doesnt matter if the trading volume is small.

However, there are also some public offerings that need further observation and careful consideration. Zhang he (pseudonym), head of a public offering fund, said the company would study the new third board fund with a prudent attitude and would not rush to report products in the near future. Another fund manager also said that at present, the companys public offering products have not planned to invest in the new third board.

Decentralized layout and subdivision leader

For the public offering products, the newly established public offering fund is expected to include the stocks of the new three board select layer in the fund investment scope. Some fund people said that if the public funds want to invest in the new third board, except for the newly issued products, the fund contracts of the existing mixed stock funds are not clear that they can invest in the selected stocks. Therefore, the old funds can only invest in the new third board after the contract is modified.

In terms of the investment ideas of the new third board and the selection criteria of the selection layer, a number of fund managers said that they need to comprehensively consider the industry structure, core competitiveness, profitability and valuation level.

Li Shiqiang, investment manager of Jiutai fund, said that in terms of investment in the new three board selection layer, the allocation style and strategy of public funds are relatively similar, that is, relatively decentralized distribution of the top advantage enterprises, especially those with large market value in the selection layer. Most of these enterprises are the leaders in the subdivision field with good liquidity.

Boshi fund related people said that the new third board was included in the scope of public fund investment, which is good for fund companies with investment research ability and personnel reserve, and they can develop fund products that mainly or partially participate in the new third board market. The market value and profitability requirements of the new three board selection layer are lower than that of the science and technology innovation board, among which the high growth stocks are worth exploring.

For the selection criteria of selected stocks, the most important is the financial quality and liquidity of the company. Only when the company continues to operate and the stock has liquidity can it maintain a reasonable valuation. Zhang he further said that in addition to a few public funds with the new third board as their main investment direction, other mainstream public funds are more prudent in their investment in the new third board. It is also a small and medium-sized company. There are quite a lot of selection targets in the A-share market, and the new third board provides more choice space.

As for the valuation calculation, Zhang he believes that compared with A-share, the new three board listing has lower requirements on profitability. Although the growth potential of selected companies is large, it is difficult to have stable earnings forecast data. There must be differences between its valuation method and the main board, and the specific valuation method is similar to that of the science and technology innovation board.

The above fund manager said that the specific valuation of the select layer is consistent with the logic of the main board, because the profit model of the select layer company is the clearest among all the companies on the new third board, and the profitability and cash flow are also the most obvious, so the relevant valuation can be made directly by analyzing the cash flow and net profit.

Focus on liquidity risk

Due to the differences in target enterprises, information disclosure, trading rules, etc., the risk of investment in the new three board is higher than that in the A-share market. Boshi fund related people said that the risk of Thunderbolt and liquidity risk in the performance of the new third board stocks are relatively prominent. It is not excluded that some stocks will be excluded from the selection layer due to performance reasons in the future. The risk of the new third board funds is higher than that of the existing stock funds. Investors participating in the new third board funds should carefully assess whether it is compatible with their own risk tolerance.

Li Shiqiang said that from past experience, the disturbance of dramatic changes in the companys fundamentals is the primary risk faced by investors. Most of the small and medium-sized enterprises in the new third board are small in scale and volume, which are greatly affected by the external economic environment and industrial environment changes, resulting in significant fluctuations in the companys operation. In addition, the business and financial standardization of the new third board enterprises are also less than that of a shares. Of course, in the specific trading process, compared with a shares, liquidity considerations need to be more. Therefore, on the one hand, we need to select industries, dig deep into individual stocks, and do solid research on fundamentals. At the same time, we should control the tolerance of valuation and distribute it properly.

The most important thing to pay attention to in the new three board investment is liquidity risk, which needs to be further studied to prevent risks. Said the fund manager.

The guidance points out that fund managers and fund custodians should use fair valuation methods to value listed shares. When there is significant uncertainty in the value of shares and there is a potential large redemption application, the side bag mechanism can be used. Relevant people of Boshi Fund said that the side bag mechanism helps public funds to manage their liquidity and can partially solve the liquidity problem, but it cant completely solve it. Investors still need to focus on such risks.

Zhang he also believes that the side bag mechanism can solve the Liquidity Dilemma in stages, but it can not be solved continuously. For example, once the liquidity of the new third board stock is low and the side bag mechanism is used, it is difficult for the main bag assets to continue to invest in the new third board. Generally speaking, the ability of SMEs to resist risks is relatively weak, which is also the biggest risk faced by the new three board investment.

Source: editor in charge of China Securities News: Ren Hui, nbj9607