Zijin trade halt flags move on speculators
Regulator shows intolerance as it suspends gold miner after a debut surge of 208.56pc
Mainland regulators signalled a crackdown on wild speculation on the nation's stock markets, suspending the trading debut of Zijin Mining Group yesterday after its shares soared as much as 208.56 per cent.
Beijing is becoming increasingly intolerant of investors taking advantage of new listings to make quick profits - windfalls that tend to feed market volatility and create unhealthy asset bubbles. Regulators also restricted gains in two new listings in Shenzhen yesterday.
The intervention comes in the same week that regulators boosted the flagging market by cutting the stamp duty. Beijing now appears to be attempting a balancing act, moving to prevent both excessive declines and gains in equities.
The Shanghai Stock Exchange suspended trading of Zijin's shares for 30 minutes yesterday afternoon after the stock soared to 22 yuan from its offer price of 7.13 yuan.
It resumed trading five minutes before the close, ending the day at 13.92 yuan, still 95.23 per cent higher than its offer price. That made Zijin, one of the mainland's top three gold miners, the best-performing new issue on the exchange this year.
It was the first such intervention by the Shanghai exchange in a big listing since China launched a flood of share offerings two years ago.
The Shenzhen Stock Exchange yesterday suspended trading of two new listings on its small and medium-sized enterprises board after two stocks rose as much as 222 per cent on their debuts. The stocks, Zhejiang Sanlux Rubber and Puyang Refractories Group, closed 164 per cent and 213 per cent higher, respectively.
Wang Sheng, a strategist at Haitong Securities, said market makers had played a part in Zijin's share surge yesterday but this was nothing new to the mainland. China CAMC Engineering shot up as much as 576 per cent on its Shenzhen trading debut in June 2006.
Fujian-based Zijin, which raised 9.98 billion yuan (HK$11.1 billion) selling 1.4 billion A shares, opened at 9.98 yuan and rose steadily to 10.15 yuan before the lunch break. Speculators then appeared to be targeting the stock in the afternoon, pushing it far higher than analysts' first-day trading forecast of about 9.50 yuan.
According to Shanghai Stock Exchange regulations, the regulator can suspend trading of a new stock for 30 minutes if it gains more than 100 per cent or falls more than 50 per cent from the offer price.
For small and medium-sized companies, more stringent rules are applied, with the Shenzhen bourse suspending new issues for 15 minutes if they decline or advance 50 per cent from their offer price.
At yesterday's closing price, Zijin's A shares were trading at 63 times forecast earnings for this year. Its Shanghai-listed rivals - Shandong Gold Mining and Zhongjin Gold - trade at between 20 and 30 times. Zijin's A shares are at a 103 per cent premium to its Hong Kong-listed H shares.
'It is too high. The stock deserves a higher valuation because of its growth potential and bigger metal reserves, but not at this level,' said Harry he Chunwu, an analyst at Sumitomo Mitsui Asset Management. He said a more reasonable price would be about 10 yuan.
Before Zijin, three new listings on the mainland had posted more restrained gains. China Coal Energy rose 31.91 per cent on its Shanghai debut in February, China Railway Construction Corp climbed 28.19 per cent last month and Jinduicheng Molybdenum Group jumped 36.09 per cent earlier this month.