A flurry of formerly non-tradable shares in ChiNext-listed companies hit the Shenzhen Stock Exchange's block-trade system, raising concerns about the start-ups' prospects and pushing the benchmark index down almost 3 per cent. On Monday and yesterday, 530 million yuan (HK$613 million) worth of shares in seven companies traded on the mainland's Nasdaq-style market changed hands through block trades, according to the Shenzhen exchange. The heavy sell-off took place just after the lock-up period for previously non-tradable stakes in the first 27 ChiNext-listed firms expired on the weekend. Analysts expected the selling spree to continue as founding shareholders rushed to cash in on a frothy second-board market. Beijing launched the long- awaited ChiNext market - a board for start-ups - on October 30 last year and 1.1 billion shares held by major shareholders in 27 firms were covered by a one-year lock-up period. The exchange did not name those that dumped shares on the block-trade system. The active off-market transactions on the block-trade system were just part of the selldown activities. Those who planned to dump the shares in an orderly manner were also paring their holdings at the exchange, Dazhong Insurance fund manager Wu Kan said. According to a rule by the China Securities Regulatory Commission, major shareholders planning to offload more than 1 per cent of a listed firm within one month were required to sell the non-tradable shares through the block-trade system. 'The heavy sales were a sign that some of the founders might have decided to lock in a huge profit by cashing out of the start-ups,' Shanghai Securities analyst Wang Fen said. 'It would deal a psychological blow to investors who were betting on (continued) high growth at the firms.' The index tracking ChiNext-listed firms dived 32.37 points or 2.92 per cent to 1,075.15 yesterday. The selldown in the start-ups followed the resignations by more than 50 executives and founders in 30-odd ChiNext-listed firms. Analyst had predicted the lofty share prices would cause a wave of selling when the lock-up period expired. 'You can't blame those top managers who sold shares because the overvalued market created a chance for them to make a fortune,' Citic Securities analyst Sun Chao said. 'They can buy back the shares when the prices tumble in future.' As of yesterday, 134 companies listed on ChiNext were traded at an average 72.4 times their 2009 earnings, compared to a price-earnings ratio of 38 on the Shenzhen exchange's main board. Thousands of retail investors flocked to the second board, hoping for big returns and betting that the companies would at least double their earnings this year. However, 12 start-ups showed sharp falls in interim earnings. Some start-ups actually rely on a single contract with a corporate giant for income and are vulnerable to market uncertainties, analysts said. Beijing Ultrapower Software, for instance, saw most of its revenue come from a contract to provide China Mobile's instant-messaging service. Yesterday, Shanghai Bestway Marine Engineering Design saw 13 block-trade deals, the most among the seven companies involved in off-market transactions.