New China IPOs suspended from trading after excessive price surge

Trading in new mainland stocks suspended after rising at least 44 per cent on their debut to exceed limits set by Shenzhen exchange

PUBLISHED : Wednesday, 22 January, 2014, 12:54am
UPDATED : Wednesday, 22 January, 2014, 12:54am

Trading in the shares of seven of the eight mainland companies that made their market debut in Shenzhen yesterday was halted twice after gains exceeded limits set by the city's exchange.

Shares of Zhejiang Wolwo Bio-Pharmaceutical, Chengdu Tianbao Heavy Industry, Guangdong Qtone Education and four other companies were suspended from 10.30am until 2.57pm, three minutes before the close, after they jumped at least 44 per cent from their initial public offering prices.

All seven posted gains of 45 per cent or more by the close. Hangzhou Sunrise Technology, which climbed 19 per cent, was the only new stock that did not see trading halted.

The Shenzhen Stock Exchange warned yesterday of the risks in "blindly" speculating in new share offerings.

The mainland, the world's largest market for initial share sales in 2010 with a record US$71 billion raised, saw its first initial public offering since October 2012 last week after policymakers drafted rules aimed at tightening supervision.

"It's hard to change investors' habit of speculatively trading in new shares," said Wei Wei, an analyst at West China Securities. "Unless there's an example of a debut company falling below its offer price, the practice won't be stopped."

Trading in shares of the seven companies was suspended as stock prices reached the threshold of a 44 per cent move from their issue prices, the level that triggers suspension until three minutes before close on first-day trading by the Shenzhen exchange.

Trading was initially halted for an hour after 9.30am as the shares exceeded another limit, of a 32 per cent gain.

Neway Valve (Suzhou), the first company to start trading after the listing freeze, has fallen 14 per cent in two days since the shares jumped 43 per cent on the first day of trading on Friday.

Anhui Yingliu Electromechanical said it would debut on the Shanghai Stock Exchange today.

The securities market had not established a culture of rational investment, the Shenzhen Stock Exchange said in a statement yesterday.

The China Securities Regulatory Commission announced an end of the moratorium on listings at the end of November last year, publishing new rules aimed at cracking down on overpricing and making offerings more market-based. It has approved listings of 52 companies so far.

The share sales are testing the CSRC's attempts to revive confidence in stocks after a 37 per cent plunge in the benchmark Shanghai Composite Index over the past four years. The index gained 0.86 per cent yesterday after closing on Monday at its lowest level in more than six months. The Shenzhen Composite Index added 1.5 per cent, paring this year's loss to 1.4 per cent.