Hua Hong Semiconductor, world’s second-largest IPO this year, makes strong start on Shanghai’s Nasdaq-style Star Market

Hua Hong’s shares opened at 58.88 yuan, 13 per cent higher than the IPO price of 52 yuan, and rose by as much as 15 per cent

Hua Hong raised 21.2 billion yuan from the sale of 408 million shares on the Nasdaq-style Star Market last month

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Hua Hong Semiconductor made a strong debut on Shanghai’s Star Market on Monday. Photo: Reuters

Daniel Renin ShanghaiandZhang Shidongin Shanghai

Published: 9:55am, 7 Aug 2023Updated: 10:54pm, 7 Aug 2023

Hua Hong Semiconductor, which made the world’s second-largest initial public offering (IPO) this year, made a stellar debut on mainland China’s Star Market despite being issued at twice the price of its Hong Kong-listed shares, buoyed by mainland investors’ zeal for the country’s chip self-sufficiency.

The mainland’s second-largest semiconductor maker opened at 58.88 yuan in Shanghai on Monday, 13 per cent higher than the offer price of 52 yuan. The stock jumped by as much as 15 per cent in the morning session before moderating gains to close 2 per cent higher at 53.06 yuan. About 63 million shares changed hands, representing 60 per cent of its free-float, the proportion of outstanding shares considered available for purchase in public equity markets.

That gave Hua Hong’s yuan-traded shares a 148 per cent premium over its Hong Kong-listed stock, lower than the 189 per cent price gap for its bigger rival Shanghai-based Semiconductor Manufacturing International Corporation (SMIC), and reflecting the gap in sentiment between the foreign investors in the Hong Kong market and the domestic investors in the mainland market.

Traders said the Star Market is dominated by retail investors and is often influenced by irrational euphoria as opposed to the Hong Kong market which is dominated by institutional investors. The trading mechanism, circuit breakers and support system in the Star Market are very conducive to speculation in sharp contrast with the Hong Kong market, they said.

SMIC, the mainland’s biggest chip maker, raised 53.2 billion yuan (US$7.4 billion) in an IPO – the largest fundraising ever on the Star Market – in July 2020. Its shares skyrocketed 202 per cent when they began trading on July 16, 2020.

“Traders had all expected a first-day jump in Hua Hong shares because of the high profile of the chip industry,” said Ivan Li, a fund manager at Loyal Wealth Management in Shanghai. “They [domestic investors] believe that the country’s top chip makers will be able to catch up with foreign rivals sooner or later.”