China’s New Stock Venue-Star-Is Losing Its Luster
Average daily turnover more than halved after trading debut. Second batch of listings opens for subscription on Monday.
( in a few hours in fact-this exchange will cap daily movements at +/- 20% after the issue(s) 6th day of trading.)
Excitement is fading in China’s Star market as traders await the next batch of initial public offerings.
Prices of many of the 25 newly listed companies are falling after their average 140% first-day surge, while daily turnover is less than half Monday’s level. Though traders viewed the launch positively, the question is whether interest in existing shares will be maintained as more firms come to the table. There was already some demand to short the stocks in the first week.
Three more firms will begin subscriptions for share sales this week, while Northeast Securities Co. analyst Fu Lichun estimates about 200 companies will be trading after 12 months. Initial public offerings on the Star market are attractive to mainland investors and companies alike because firms are free to set their own valuations and there are no price limits in the first week of trading. Starting the sixth day, moves are subject to a 20% daily cap.
Semiconductor manufacturer Anji Microelectronics Technology (Shanghai) Co. is down 10% in the four days since its 400% first-day jump. The biggest stock on the board, China Railway Signal & Communication Corp., has lost 18% after doubling last Monday.
The massive first-day gains also spurred demand to borrow shares – a tool often used to bet prices will decline. The Star market is less restrictive than other venues on this practice, allowing some institutional investors to lend their holdings to brokers. For six of the firms, there were more shares on loan than there were purchased on leverage, according to Bloomberg-compiled data as of July 25.
Investors are willing to pay more for the growth: tech board stocks that posted profits in the past two years saw 2018 earnings grow by an average 88%. That compares with 25% growth for firms on the Shanghai Composite Index, and a 16% expansion rate for those on Shenzhen’s ChiNext.
More than 120 companies have joined the queue to list on the tech board.
https://www.bloomberg.com//news/articles/2019-07-28/frenzy-abates-in-china-s-new-stock-venue-as-short-sellers-circle