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ShareTrading on the first batch of 28 companies on the ChiNext board, billed somewhat exaggeratedly as 'China's Nasdaq', was repeatedly suspended to cool down overheated speculative sentiments; nevertheless, the stocks ended the day up by between 76% and 210%. "It's all extremely crazy," noted an afternoon editorial in Meiri Jingji Xinwen (National Business Daily).
The IPO prices valued the 28 companies (almost all of whom are private) in excess of 50 times their earnings, but even those bubbly valuations were sent soaring sky-high as investors starved of investment avenues poured money in blindly, unmindful of the risks. "ChiNext is designed to fund innovation and risk-taking," noted UOB Kay Hian analyst Barole Shiu. "Overvaluation is a worry."
Shenzhen Stock Exchange general manager Song Liping said ChiNext's launch, which had been in the works for 10 years, was a "very significant event" in developing China's capital markets.
Song acknowledged that the pricing on the board reflected an "immature phenomenon", but claimed that high valuations for companies listing on the board were "very normal" because of the vastly different profile of the companies.
Shang Fulin, chairman of the securities markets' regulator, said ChiNext's launch was a "significant step towards promoting innovation" in China. He nevertheless called for "rational" investments, noting that while start-up companies have the potential to grow strongly, they also faced uncertainty.
Still, it appeared that few investors were listening to such words of caution. In fact, so spectacular was ChiNext's debut that analysts are now worried that it will divert liquidity away from the more mature (and more sedate) Shanghai and Shenzhen stock markets.
"ChiNext's stunning debut may bode ill for the main board's performance as more investors may be drawn to it," noted Huatai Securities analyst Li Wenhui. Both the Shanghai and Shenzhen markets made gains on Friday after a sharp fall a day earlier, but the day's star performer, even given the lower trading volumes, was the ChiNext board.
The 28 companies raised a staggering 15.5 billion yuan in their IPOs, and drew 1.9 trillion yuan in subscriptions; the stock offers were oversubscribed, on average, by over 120 times. Analysts noted that this pointed to abundant liquidity in the markets, which is encouraging news for others waiting to list, both on ChiNext and on the main board.
