SHANGHAI: The frenzy that greeted China’s new Nasdaq-style stock board is already fading.
All but four of the 25 new listings dropped yesterday, with the market down an average 7.7% by midday break in Shanghai. China Railway Signal & Communication Corp and Western Superconducting Technologies Co were among the biggest decliners, while Espressif Systems Shanghai Co bucked the trend with a 15% advance.
The stocks are still higher than their listing prices, after they surged an average 140% on the first day.
The so-called Star market opened to much fanfare on Monday less than a year after President Xi Jinping first touted the project.
Investors exchanged more than US$7bil worth of the shares, equivalent to about 13% of turnover in the rest of the market. Monday’s surge also created three new billionaires.
“We’ve never been in a market with no trading limits so it’s going to be a bit of a chaos in the early days of trading,” said Sun Jianbo, president of China Vision Capital Management in Beijing.
“The high volumes suggest that many investors that won subscription in share offering have dumped shares.”
The new venue is an attempt from China to avoid losing its fastest-growing companies to exchanges in New York or Hong Kong. Shares on the Star board have no daily price limits for the first five trading days, followed by a 20% cap in either direction.
The Shanghai stock exchange will create an index tracking the firms about two weeks after the 30th listing starts trading.
Analysts have said while it is important for China to try out new reforms on the tech board, the first-day gains looked overdone and valuations should come down to more reasonable levels.
Before the shares stabilise, China Vision Capital’s Sun expects to see “a tug of war” between speculators on the new listings and investors locking in profits once prices exceed their expectations.
Anji Microelectronics Technology (Shanghai) Co, which jumped as much as 521% on Monday, dropped 10% in morning trading yesterday. Advanced Micro-Fabrication Equipment Inc, which surged in its debut to a level of more than 730 times earnings, extended gains with a 3.3% advance. — Bloomberg