GEM shares soar as trading begins
By Winny Wang and Leo Zhang |
October 31, 2009, Saturday
|
Print Edition
Print Edition
ALL 28 companies listed on China's new Nasdaq-style stock exchange soared on their first day of trading yesterday, fueled by an explosion of speculative enthusiasm.
Trading in every share was temporarily suspended at least once during the day under rules designed to dampen wild swings in prices.
The ChiNext board is intended to help smaller Chinese companies in a financial system that has long favored big, state-owned companies. Most companies on the new growth enterprise market are privately owned, while China's main bourses in Shanghai and Shenzhen are dominated by government enterprises.
Six companies on ChiNext, which is hosted by the Shenzhen exchange, are in biotech or pharmaceuticals, and others are in information technology, energy efficiency, telecommunications, medical equipment and electronics.
The size of share offerings on ChiNext is small compared with the multibillion-yuan initial public offerings on the main boards, but analysts said investors would welcome the new opportunities.
Indeed, they did.
"The speculative mood was massive," Wu Ke, a Zhongtian Investment Consulting Co analyst, said yesterday. "But despite their high quality and good growth potential, the current valuations for these startups are not reasonable."
Analysts suggested that the regulator ensure a steady supply of new shares to keep Chinese mainland stock valuations under control.
"Regulators should boost new supplies as soon as possible, and I believe they will definitely step up the pace after seeing the debut performance" of the new GEM, said Liu Yu, an Orient Securities Co analyst.
The average turnover ratio of the 28 companies exceeded 85 percent, indicating that most investors who won shares in subscriptions sold off their holdings to lock in a profit.
"I sold my shares in Qingdao TGOOD Electric Co at 40 yuan apiece in the morning session on concern that prices would retreat in the afternoon, but I didn't expect the price would surge that high," said an investor surnamed Chen who bought 500 shares at the initial public offering price of 23.8 yuan.
TGOOD, a large research and development and production base for transformer substations, jumped nearly 85 percent to close at 44 yuan.
Monday may bring a decidedly different track, however.
"The stocks are set to drop in the following days as investors rush to sell off their equities on worries about bubbles," said Zhang Xiaoguang, an investment adviser at China Merchants Bank. "People who chase the chips blindly will get hurt badly."
The biggest gainer on a percentage basis was Chengdu Geeya Technology Co, a digital equipment provider that surged 210 percent to close at 35 yuan.
Among the other big winners was Beijing-based Huayi Brothers Media Corp, which jumped 148 percent. The company, China's biggest private film maker, was founded in 1994 by Wang Zhongjun and is held by more than 50 movie heavyweights such as famed director Feng Xiaogang and actor Huang Xiaoming.
Wang's holdings were valued at 3.11 billion yuan after the surge, and Feng's were valued at 204 million yuan.
A total of 188 companies have submitted applications to seek a listing on the board. The China Securities Regulatory Commission is due to meet on Monday to consider IPO applications from three more firms.
Trading in every share was temporarily suspended at least once during the day under rules designed to dampen wild swings in prices.
The ChiNext board is intended to help smaller Chinese companies in a financial system that has long favored big, state-owned companies. Most companies on the new growth enterprise market are privately owned, while China's main bourses in Shanghai and Shenzhen are dominated by government enterprises.
Six companies on ChiNext, which is hosted by the Shenzhen exchange, are in biotech or pharmaceuticals, and others are in information technology, energy efficiency, telecommunications, medical equipment and electronics.
The size of share offerings on ChiNext is small compared with the multibillion-yuan initial public offerings on the main boards, but analysts said investors would welcome the new opportunities.
Indeed, they did.
"The speculative mood was massive," Wu Ke, a Zhongtian Investment Consulting Co analyst, said yesterday. "But despite their high quality and good growth potential, the current valuations for these startups are not reasonable."
Analysts suggested that the regulator ensure a steady supply of new shares to keep Chinese mainland stock valuations under control.
"Regulators should boost new supplies as soon as possible, and I believe they will definitely step up the pace after seeing the debut performance" of the new GEM, said Liu Yu, an Orient Securities Co analyst.
The average turnover ratio of the 28 companies exceeded 85 percent, indicating that most investors who won shares in subscriptions sold off their holdings to lock in a profit.
"I sold my shares in Qingdao TGOOD Electric Co at 40 yuan apiece in the morning session on concern that prices would retreat in the afternoon, but I didn't expect the price would surge that high," said an investor surnamed Chen who bought 500 shares at the initial public offering price of 23.8 yuan.
TGOOD, a large research and development and production base for transformer substations, jumped nearly 85 percent to close at 44 yuan.
Monday may bring a decidedly different track, however.
"The stocks are set to drop in the following days as investors rush to sell off their equities on worries about bubbles," said Zhang Xiaoguang, an investment adviser at China Merchants Bank. "People who chase the chips blindly will get hurt badly."
The biggest gainer on a percentage basis was Chengdu Geeya Technology Co, a digital equipment provider that surged 210 percent to close at 35 yuan.
Among the other big winners was Beijing-based Huayi Brothers Media Corp, which jumped 148 percent. The company, China's biggest private film maker, was founded in 1994 by Wang Zhongjun and is held by more than 50 movie heavyweights such as famed director Feng Xiaogang and actor Huang Xiaoming.
Wang's holdings were valued at 3.11 billion yuan after the surge, and Feng's were valued at 204 million yuan.
A total of 188 companies have submitted applications to seek a listing on the board. The China Securities Regulatory Commission is due to meet on Monday to consider IPO applications from three more firms.
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