(Yicai Global) Nov. 16 -- Several overseas financial institutions, including UBS and Morgan Stanley, have embraced the potential of Beijing's first-ever stock exchange.

China is an important market for UBS which is looking forward to actively participating in the relevant business of the Beijing Stock Exchange, Qian Yujun, chairman of the Zurich-headquartered investment bank's Beijing arm UBS Securities, said to Yicai Global.

A total of 112 securities companies, including UBS Securities, have become official members of the new bourse, according to the BSE's website. Many more are in the process of applying for a membership, Yicai Global learned.

The mainland stock exchange, which kicked off yesterday with a total of 81 firms, aims to improve SMEs' financing options. The group consists of 71 companies that were moved there from the National Equities Exchange and Quotations' select tier. The tier was founded in 2019 to accommodate SMEs. Moreover, the BSE has 10 new listings which were surging on the first day of trading.

Equities of the 10 newly listed firms soared nearly three times on average yesterday. Among them, shares of Henan province-based auto parts maker Tongxin Transmission [BSE:833454] rose the most by jumping almost six times to CNY23.5 (USD3.70). However, most of the 71 "old stocks" closed lower, with an average drop of 6.8 percent.

The BSE should meet SMEs' demand. Compared with China’s existing Star Market and ChiNext, the BSE has a lower threshold for listing, not emphasizing net profit, thus achieving the purpose of serving more small and medium-sized innovative firms, said Qian.

The BSE will take on the role of the select tier of the NEEQ to gather the best quality SMEs which can then list on the main boards of the bourses of Shanghai and Shenzhen without the need for initial public offerings, Katherine Liu, equity analyst at Morgan Stanley, told Yicai Global.

"We see this as a step forward in capital market reform that strengthens the multi-layered capital market system and direct financing," Liu added.

But the entry of overseas capital may be calm at the start. There will be no policy barriers for qualified foreign institutional investors to invest in companies listed on the BSE, according to regulations issued in September 2020. However, the custodian bank may not be ready yet with some technical barriers to resolve, Yicai Global learned from industry insiders.

Compared with the QFII mechanism, foreign investors currently prefer investing in firms listed on the Chinese mainland through the Hong Kong Stock Connect. Therefore, widespread participation may have to wait till the Beijing-listed companies are included in the offshore trading program, according to institutional sources.

Editor: Dou Shicong, Emmi Laine, Xiao Yi