Research On Determining Price Mechanism Of The GEM

AbstractThe capital market is the core of a market economy. The capital market of China, however, has suffered from low operational efficiency, irrational structuring, and failure in optimizing the allocation of financial assets. The above-mentioned problems are displayed mainly in two aspects ------- one is the scarcity of investment channels for the general public, and the other is the congestion of financing channels for the medium and small sized enterprises. These enterprises are playing a more and more important role in the national economy ------ according to statistics, there are about 400,000 industrial enterprises with independent accounting in the mainland, which account 95% of all the medium and small sized enterprises, absorbing 75%of all the labor force in the industrial enterprises and 100million rural laborers. In view of the situation, it is not hard to conclude that to improve the capital structure of China is important for the development of the Chinese economy. Hence the emergence of the GEM, which serves as, a capital support for the growth of those medium and small sized enterprises.GEM is a capital market dedicated to the medium and small sized fledging enterprises, which is of great venture. Its assessment and pricing are different from those of traditional stocks. The risk accompanied the growth and management of these enterprises, the ways of order flow and the strategies used by traders, the degree and frequency in information publicity all are the important aspects leading to fluctuation of GEM price.This paper, using related research results in the relationship between market exchange mechanism and price determining, analyses the characteristics of the coming GEM in China and the designing features of its exchange mechanism, and probes into the price determining processes of stocks in batch market and continuous market. This paper also makes an analysis of the strategies used by different traders on GEM. At the end of this paper, the author discusses about the price determining of initial public offering price for new issues on GEM. This paper aims to provide some operative methods for pricing new issues on GEM at the first level as well as some effective methods to determine the price discrepancy, to analyze the price fluctuation and to evaluate an investment on GEM at the second level. Besides, this paper also offers some operative advice and suggestions for the supervision of GEM.