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Price limits for trading debut
By Winny Wang |
July 4, 2009, Saturday
|
Print Edition
Print Edition
THE Shenzhen Stock Exchange will limit price fluctuations of shares in small and medium-sized companies on their debut trading day to curb speculation and protect investors in a move that an analyst said would likely prove ineffective.
Trading will be suspended for 30 minutes on a company's debut day if its share price rises or falls by more than 20 percent from the opening, the Shenzhen bourse said in a statement on its Website yesterday. Another 30-minute suspension will be enforced when a share price fluctuates by more than 50 percent in either direction.
"The new rule won't curb speculation very much because it only limits trading on the first day," said Lu Jiehua, an analyst at Shenyin Wanguo Securities Co. "Investors can continue buying shares in the following days if they expect high returns."
Chinese investors typically favor initial public offerings as prices almost always surge on the first day of trading. However, more than half of these investors suffer losses after 20 trading days as the share price tends to drop rapidly after an initial spurt, the smaller of the Chinese mainland's two stock exchanges said.
About 54 percent of investors who traded on a company's debut day had bought the shares after they had already surged more than 300 percent, the exchange said.
"The bourse will closely monitor trading of debut stocks, suspend stock accounts that use continuous bidding, cancellations or make high bids from trading and report them to the China Securities Regulatory Commission for investigation," the statement said.
The new rule came on the heels of the resumption of new share sales after a nine-month hiatus.
Guilin Sanjin, the first company to be listed in Shenzhen after the suspension was lifted, was 584 times oversubscribed for the retail portion of its share issue and attracted 455 billion yuan (US$66.6 billion) in investor subscription funds.
Zhejiang Wanma Cable Co, which will launch the next IPO, said it increased the amount it planned to raise by 68 percent after institutional investors sought 189 times the shares made available to them.
Trading will be suspended for 30 minutes on a company's debut day if its share price rises or falls by more than 20 percent from the opening, the Shenzhen bourse said in a statement on its Website yesterday. Another 30-minute suspension will be enforced when a share price fluctuates by more than 50 percent in either direction.
"The new rule won't curb speculation very much because it only limits trading on the first day," said Lu Jiehua, an analyst at Shenyin Wanguo Securities Co. "Investors can continue buying shares in the following days if they expect high returns."
Chinese investors typically favor initial public offerings as prices almost always surge on the first day of trading. However, more than half of these investors suffer losses after 20 trading days as the share price tends to drop rapidly after an initial spurt, the smaller of the Chinese mainland's two stock exchanges said.
About 54 percent of investors who traded on a company's debut day had bought the shares after they had already surged more than 300 percent, the exchange said.
"The bourse will closely monitor trading of debut stocks, suspend stock accounts that use continuous bidding, cancellations or make high bids from trading and report them to the China Securities Regulatory Commission for investigation," the statement said.
The new rule came on the heels of the resumption of new share sales after a nine-month hiatus.
Guilin Sanjin, the first company to be listed in Shenzhen after the suspension was lifted, was 584 times oversubscribed for the retail portion of its share issue and attracted 455 billion yuan (US$66.6 billion) in investor subscription funds.
Zhejiang Wanma Cable Co, which will launch the next IPO, said it increased the amount it planned to raise by 68 percent after institutional investors sought 189 times the shares made available to them.
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