A new stock exchange in China’s Changhai which has been developed on the style of the United States’ exchange Nasdaq saw shares on the exchange shoot up by as much as 500 per cent. Analysts see this as a clear signal by enthusiastic Chinese investors to lend support for the tech business of the country.

Market experts and analysts believe that the logic behind the setting up and launch of the Star listing of domestic tech firms of China is a direct attempt by Chinese authorities to provide an alternative to the Nasdaq for Chinese as well as foreign tech companies. This, many see, as a measure by China to avoid Chinese tech companies from using the Nasdaq as a stock exchange in the backdrop of the lingering trade war between the United States and China.

Other analysts also consider this new measure in Shanghai to be a bold step towards implementing further reforms in the Chinese financial market because of the inclusion of a US-style system for initial public offerings (IPOs) among the features of the Star market.

An initial batch of 25 companies was included in the inaugural trading on Monday. The batch included Chinese etch companies such as chipmaker Anji Microelectronics Technology which saw its shares surge by as much as 520 per cent compared to its IPO price in morning trading. Such astronomical increase in share prices took place despite authorities of the newly formed exchange being forced to suspend its shares twice throughout the day with the use of circuit breakers which are put to use to slow down a sudden and high burst in trading.

And despite dropping by 30 per cent at the market opening, there was 113 per cent rise from the listing price of the shares of Suzhou Harmontronics Automation Technology.

There is a cap imposed in most Chinese stock markets over the amount of rise in share prices at 44 per cent during the first five days of trading. However, there is no such limit or cap at the Star market. The authorities at the Star market have also decided to loosen the rules somewhat for investors and trades after the initial five-day period. The rules of the Star shares allow share prices to rise or drop by as much as 20 per cent where as other Chinese stock exchanges allow only 10 per cent.

According to a statement issued earlier this month by the Shanghai stock exchange, applications to be listed on Star that the exchange received before the launch totaled 141. Star is an acronym that is used loosely to denote the Sci-Tech Innovation Board.

The ongoing anti government protests in Hong Kong saw its Hang Seng index drop by 1.15 per cent while Shanghai’s composite index recorded a drop of 1.3 per cent.

(Adapted from TheGuardian.com)

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