Update: China’s New High-Tech Board Blasts Off
* During the morning session, 22 of the stocks triggered a circuit breaker that causes trading to be suspended for 10 minutes, with 14 being paused due to rising 30%
* China’s other boards had a gloomier day, with the main board’s benchmark Shanghai Composite Index slipping 1.27% on Monday
(Beijing) — Shanghai’s long-awaited high-tech board debuted on Monday, with all 25 listed stocks soaring, underlining a buying frenzy after some large oversubscriptions.
The Nasdaq-style high-tech board, also called the STAR Market, which is hosted by the Shanghai Stock Exchange, started trading on Monday with the 25 newly listed stocks surging an average of nearly 140%. Several dropped sharply after a high opening although all stayed well above their initial public offering (IPO) price.
Despite paring morning gains, Anji Microelectronics Technology (Shanghai) Co. Ltd.’s stock closed up over 400% in the largest climb of the day. Harbin Xinguang Optic-Electronics Technology Co. Ltd. saw the smallest climb in stock price, closing up 84%.
China’s other boards had a gloomier day, with the benchmark Shanghai Composite Index slipping 1.27% on Monday, and the Shenzhen Component Index closing down 1.15%. The tech-heavy ChiNext Index fell 1.69%.
Under the new tech board’s rules (link in Chinese) there are no daily limits for a stock’s first five trading days, and gains and declines will be subject to a 20% daily cap after that. On China’s other boards, the current cap on share-price fluctuations on the first day of trading is 44% and 10% on subsequent days. Zheng Hong, an analyst with Lian Chu Securities Co. Ltd., told Caixin that the tech board is designed for professional investors, and without such limits, the stocks are expected to be bought and sold many times and have their prices be subject to market expectations.
During the morning session alone, 22 of the stocks triggered a circuit breaker that causes trading to be automatically suspended for 10 minutes, with 14 being paused due to rising 30% from their opening price and eight being paused after falling 30%.
The trading suspensions reflect strong demand from investors and show that the new system is working, said Yang Zhenyu, an analyst at Central China Securities Co. Ltd., told Caixin. Analysts had expected high volatility amid looser trading rules and massive demand for the newly listed stocks.
The high-tech board is the first in China to trial a registration-based system, and has abolished an unofficial cap on the price-to-earnings ratio imposed on listing candidates — the upper limit has been set at 23 since early 2014 and informally enforced through “window guidance” to companies and their advisors. The aim of the change is to let investors and the market decide on shares’ prices, as in other countries, rather than the regulators.
China Securities Regulatory Commission Chairman Yi Huiman said earlier in June that the registration-based mechanism might result in more frequent delistings and higher IPO prices. But yet investors still showed great interest in the board even before it started trading, with some IPOs oversubscribed more than 300 times.
To track the tech board’s performance, the SSE will release an index, dubbed the SSE STAR 50 index, on the 11th trading day after 30 companies are listed on the board.
Low De Wei also contributed to this report.
Contact reporter Timmy Shen (firstname.lastname@example.org, Twitter: @timmyhmshen)
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