Manic Monday for China’s Nasdaq-style bourse as shares rocket
SHANGHAI – Trading on China’s new Nasdaq-style board for homegrown tech firms hit a fever pitch on Monday, sending shares up as much as 400% for the day, and far exceeding the expectations of veteran investors braced for a wild ride.
Sixteen of the first batch of 25 companies – ranging from chip-makers to health care firms – more than doubled their already frothy initial public offering (IPO) prices on the STAR Market, operated by the Shanghai Stock Exchange.
The companies racked up average gains of 140% in a raucous first day of trade that tripped the exchange’s circuit breakers designed to calm frenzied activity. The day’s weakest performer leapt 84.22%.
“The price gains are crazier than we expected,” said Stephen Huang, vice president of Shanghai See Truth Investment Management. “These are good companies, but valuations are too high. Buying them now makes no sense.”
Modeled after Nasdaq, and complete with a U.S-style IPO system, STAR may be China’s boldest attempt at capital market reforms yet. It is also seen driven by Beijing’s ambition to become technologically self-reliant as a prolonged trade war with Washington catches Chinese tech firms in the cross-fire.
Trading in Anji Microelectronics Technology (Shanghai) Co Ltd (688019.SS), a semiconductor firm, was briefly halted twice as the company’s shares hit two circuit breakers – first after rising 30%, then after climbing 60% from the market open.
The mechanisms did little to keep Anji shares in check as they soared as much as 520% from their IPO price in the morning session. Anji shares ended the day up 400.2% from their IPO price, the day’s biggest gain, giving the company a valuation of nearly 242 times 2018 earnings.
Suzhou Harmontronics Automation Technology Co Ltd (688022.SS), in contrast, triggered its circuit breaker in the opposite direction, falling 30% from the market open in early trade before rebounding. But by the market close, the company’s shares were still 94.61% higher than their IPO price.
Wild share price swings, partly the result of loose trading rules, had been widely expected. IPOs had been oversubscribed by an average of about 1,700 times among retail investors.
The STAR Market sets no limits on share prices during the first five days of a company’s trading. That compares with a cap of 44% on debut on other boards in China.
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