Punters make hay as Star shines on debut

Business | Bloomberg 23 Jul 2019

Chinese investors greeted the opening of the country's Nasdaq-style equity market with a frenzied burst of trading yesterday, driving gains in all 25 companies that made their debut.

Investors propelled a little-known semiconductor manufacturer to a 521 percent surge, traded a mid-sized railway company 13 times more feverishly than the world's largest bank and valued a chipmaking-gear producer at an eye-watering 730 times earnings.

The stocks jumped an average 140 percent at the close in Shanghai, even as most slipped from their intraday highs. About 48.5 billion yuan (HK$55.04 billion) of shares changed hands on the so-called Star board, or about 13 percent of turnover in the rest of the market.

The new venue is China's latest attempt to avoid losing the next Alibaba Group or Tencent (0700) to exchanges in New York or Hong Kong. Endorsement from top officials helped generate such enthusiasm that firms raised a combined US$5.4 billion (HK$42.12 billion), about 20 percent more than planned. Demand from retail investors has outstripped supply by an average 1,800 times, even as some analysts voiced concern over lofty valuations.

"Gains were much stronger than expected, either due to unreasonable IPO pricing or speculative trading," said Zhu Junchun, a Shanghai-based analyst with Lianxun Securities. "It's going to be a liquidity game in the first half year or one year of trading. Judging by the trading activity and gains on the board, it's definitely a success."

The board is also a testing ground for regulators, who have waived rules on valuations and debut-day price limits for the first time since 2014.

The venue is the only one in China to welcome companies that have yet to make a profit, as well as shares with unequal voting rights. 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. Only certain qualified foreign investors can buy the stocks directly, as there's no access through trading links with Hong Kong.

Advanced Micro-Fabrication Equipment, which was the most expensive listing of the batch, jumped as much as 331 percent.


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