What is the Typical Trend of the ChiNext Board, and What Are the Requirements for Trading on It?

Investors who closely follow China’s stock market will have noticed that the ChiNext Board, once regarded by many as a "monster," has shown increasingly positive trends in recent years, attracting more and more investors to this sector. So, what is the trend of the ChiNext Board? What conditions must be met to invest in it?

First, let’s examine the reasons behind the ChiNext Board’s strong performance in recent times:

1. The stock market is composed of listed companies, with numerous stocks forming an integrated trading system. In essence, stock prices are unlikely to perfectly reflect their actual value—sometimes they are overestimated, other times underestimated. In 2015, the ChiNext Index surged to 4,037 points, clearly overvalued. However, it then plummeted to 1,184 points, a drop of 70.7%. This excessive decline created a loss of opportunity, naturally drawing substantial capital into the ChiNext Board.

2. Driven by economic transformation, many companies listed on the Shanghai Main Board belong to traditional industries, some of which are sunset industries. While these companies may not go bankrupt, their businesses show little improvement, and their performance remains stagnant. In contrast, many companies on the ChiNext Board are part of the emerging economy. As China shifts from traditional fixed-asset investment-driven growth to innovation-driven development, the tech sector gains more potential, boosting the valuation of the ChiNext Board.

3. The benefits of the registration-based IPO reform. Many investors initially viewed the registration-based system as a "monster," considering it a major negative factor and remaining extremely bearish on the ChiNext Board. However, the stock market defied expectations—the more the public disliked the ChiNext Board, the more it performed contrary to their predictions. Instead, the registration-based system proved beneficial for the ChiNext Board, enhancing its value development efficiency and unlocking its potential. This left many investors anticipating a crash while watching the ChiNext Index continue to rise.
   
   

Investing in the ChiNext Board is not easy:

• Investors who opened ChiNext trading permissions before April 28, 2020, can continue trading ChiNext stocks without restrictions. However, if they participate for the first time in the subscription or trading of ChiNext depository receipts issued under the registration-based system, they must re-sign a paper or electronic version of the ChiNext Investment Risk Disclosure Statement.

• Investors opening ChiNext trading permissions on or after April 28, 2020, must meet the following conditions:

1. The average daily assets in their securities account must be no less than RMB 100,000 over the 20 trading days prior to applying for ChiNext trading permissions. Note that this amount does not include funds or securities used in margin trading.

2. They must have at least 24 months of securities trading experience, and new retail investors must also sign a paper or electronic ChiNext Investment Risk Disclosure Statement.