The 25 companies that debuted on China's new technology board rose an average of 140 percent in the first trading day, minting billionaires out of three company presidents. However, sharp falls were seen in most listed shares on the second day of trading.
Thanks to a new Nasdaq-like board in China, a few billionaires have been created on Monday. The presidents of Suzhou HYC Technology, Zhejiang Hangke Technology, and Arcsoft Corp saw their personal net worth skyrocket to above $1 billion as their companies debuted on the newly created Star Market, according to data from Bloomberg.
Tom Zhou, a fund manager at Shanghai River East Asset Management, said he expects initial volatility as investors try to figure out fair valuations, but said the focus will shift towards assessing whether the companies’ growth potential can support their share prices. «If not, we will see share value retreat,» said Zhou, who was quoted in «Bloomberg»(behind paywall).
Sharp falls were seen in most listed shares on the second day of trading, underscoring the volatility of the country's new Nasdaq-style board. At the time of this report, ArcSoft Corporation's share price was down 9.8 percent.
Less Stringent Rules
On Monday, Anji Microelectronics Technology (Shanghai) led all stocks on the Star market by closing up 400 percent. Such first-day surges are due to differing market rules with other exchanges in China.
Regulators have waived restrictions on valuations and welcome unprofitable companies, as well as shares with unequal voting rights. Stocks on the Star market have no daily price limits for the first five trading days, followed by a 20 percent daily cap in either direction.
Keeping Unicorns at Home
Rising personal fortunes of technology founders due to unrestrictive valuations could signal more willingness by China's fastest-growing companies to list at home rather than heading to New York or Hong Kong.
About 48.5 billion renminbi ($7.1 billion) of shares traded on the new venue, roughly 13 percent of the day’s turnover for the Shanghai and Shenzhen exchanges. The market’s long-term success, however, will depend on sustainable gains, said Shen Zhengyang, an analyst at Northeast Securities.
