SHANGHAI, Nov 14 (Reuters) - The benchmark index on China's main over-the-counter (OTC) equity market on Tuesday finished at its lowest level in almost three years, having broken below the 1,000 point mark, amid growing investor worries about tighter regulations.
The prolonged loss in the New Third Board - the board is now down over 60 percent from its April 2015 peak - contrasts sharply with a strong recovery in China's main stock exchanges, and casts a cloud over the future of a marketplace some had hoped could incubate China's Google or Microsoft.
On Tuesday, investors pushed the NEEQ Market Making Component Index - which tracks the most liquid companies on the New Third Board - to as low as 998.89 points, its weakest since Jan. 12, 2015. It closed on Tuesday at 1,000.437 points.
"It's a wake-up call that prods thinking about the board's fate - how to reform it, and when," said Wang Jin, a lawyer at Hiways Law Firm, who represents some New Third Board companies.
He said the market, potentially a key financing channel for China's small private firms, is strangled by low liquidity, as regulators tighten supervision.
The market had strong expectations that regulators would soon lower the investment threshold, which currently bars participation by investors with less than 5 million yuan in their trading accounts. However, Wang said "any relaxation now seems unlikely with regulators becoming increasingly cautious".
Meanwhile, regulators have tightened scrutiny on initial public offerings over the past weeks, dealing a blow to investors who had hoped that many companies traded on the New Third Board would be soon eligible for a public listing.
"Investors' interest is waning as IPOs are getting more difficult," said Peng Hai, an analyst at Lianxun Securities.
"Liquidity is extremely poor now. If there is little trading, how can this market develop?" (Reporting by Samuel Shen and John Ruwitch; Editing by Sam Holmes)