Chinese investors yesterday greeted the opening of the country's NASDAQ-style stock market with a frenzied burst of trading, driving gains in all 25 companies that made their debut.
China now has the world's second largest stock trading equity market, just behind the USA and ahead of London. Ding predicts that, within a few days, share prices will nosedive as investors' enthusiasm cools down and they return to a more cautious approach.
On Monday, Anji Microelectronics Technology (Shanghai) led all stocks on the Star market by closing up 400 percent.
The sci-tech innovation board is China's latest reform attempt to turn the A-share market into a more market-oriented and law-based one.
China is battling a trade war with the USA, which Washington recently widened to target technology companies, including through trade restrictions on Chinese tech giant Huawei. In comparison, the main board has a 10% limit for price gains or losses.
Star's initial lineup also includes chipmakers, AI companies, biotech firms, electric-car battery makers, and suppliers for high-speed railways.
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For the first time, Chinese companies can list without a track record of past profits or restrictions on IPO pricing. We sense that since the trade war erupted, the STAR Market had been fast tracked, as it will raise funding for technology companies that often complete against United States companies.
"The STAR Market will become an important impetus to promote the high-speed development of China's high-tech industries", Yin said. IPOs had been oversubscribed by an average of about 1,700 times among retail investors.
Rising personal fortunes thanks to the new Nasdaq-style venue could go some way toward helping China keep the next Alibaba Group Holding at home rather than seeing its fastest-growing companies head to NY or Hong Kong for their initial public offerings.
When big tech companies list overseas, the government in Beijing loses influence over their fundraising and Chinese investors can not share in those companies' success due to restrictions on purchasing overseas-listed shares.
That effect was clear on Monday, with the benchmark Shanghai Composite Index falling 1.27%, and the blue-chip CSI300 index ending 0.69% lower. China's chief securities regulator Yi Huiman claimed "the new stock board is a pilot program, to try out new practices before implementation elsewhere". "With the great values these listed companies are given today", Ding said, "you could sense some institutions trying to ramp up the price to lure inexperienced individual investors and "harvest" their riches".
The Nasdaq-style board focuses on companies in strategic emerging sectors, such as next-generation information technology, advanced equipment, new materials, new energy, energy saving, environmental protection and biomedicine. "The market can not bear that", said Yang.