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Shenzhen exchange to limit debut companies

THE Shenzhen Stock Exchange will limit fluctuations of small and medium-sized companies on their opening day to curb speculation and protect investors.

Companies will be suspended from trading for 30 minutes at debut if their shares rise or fall by more than 20 percent from the opening price, the Shenzhen bourse said in a statement on its Website today.

They will face another 30-minute suspension if shares fluctuate by more than 50 percent in either direction, according to the statement.

Chinese investors favor initial public offering shares as they always surge at debut, but as a result of this, more than half the investors suffered losses after 20 trading days, said the smaller of the two stock exchanges on the Chinese mainland.

"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.

A total of 76 companies that sold debut stock on the mainland last year jumped an average 152 percent on debut even as the wider market was tumbling, according to data compiled by Bloomberg.

The new rule will not have a great effect in curbing speculation because it only limits trading on debut, and investors can continue buying shares in the following days on expectations of high returns, said Lu Jiehua, an analyst at Shenyin Wanguo Securities Co.


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