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 closing down an average 7.9 percent in Shanghai.
China Railway Signal & Communication Corp (中國鐵路通信信號) and Western Superconducting Technologies Co (西部超導材料科技) were among the biggest decliners, while Espressif Systems Shanghai Co (上海樂鑫信息科技) bucked the trend with a 14 percent advance.
The shares are still higher than their listing prices after they surged an average 140 percent on the opening day.
The so-called STAR market on Monday opened to much fanfare less than a year after Chinese President Xi Jinping (習近平) first touted the project.
Investors exchanged more than US$7 billion of shares, equivalent to about 13 percent 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,” Beijing-based China Vision Capital Management (中國華新資本管理) president Sun Jianbo (孫建波) said. “The high volumes suggest that many investors that won subscription in share offering have dumped shares.”
The new venture is an attempt by 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 percent cap in either direction.
The Shanghai stock exchange is to 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 technology board, the first-day gains looked overdone and valuations should come down to more reasonable levels.
Before the shares stabilize, 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 (上海安集微電子), which jumped as much as 521 pecent on Monday, dropped 8.8 percent yesterday.
Advanced Micro-Fabrication Equipment Inc (中微半導體設備), which surged on its debut to a level of more than 730 times earnings, extended gains with a 2.8 percent advance yesterday.
Chinese stocks yesterday closed higher, aided by gains in infrastructure and information technology firms. The blue-chip CSI300 index rose 0.2 percent to 3,789.91, while the Shanghai Composite Index closed up 0.5 percent at 2,899.94.
Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.13 percent, while Japan’s Nikkei index closed up 0.95 percent.
Additional reporting by Reuters
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