China’s answer to Nasdaq turns out to be a one-day wonder after all, and that should concern Xi Jinping

China’s answer to Nasdaq helped 25 companies raise 37 billion yuan in the seven months it took to get up and running

All but four of the 25 firms that debuted on the board fell by second day, as investors took flight after profiting from the average debut gain of 140 per cent

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Investors beside a banner promoting the newly launched Shanghai Technology & Innovation Board, or Star board, at a brokerage in Hangzhou on Monday. Photo: Chinatopix via AP

Zhang Shidongin ShanghaiandDaniel Renin Shanghai

Published: 10:30pm, 23 Jul 2019Updated: 11:44pm, 23 Jul 2019

China’s answer to the Nasdaq, which took seven months to get up and running and helped 25 companies raise 37 billion yuan (US$5.4 billion), turned out to be a one-day wonder after all, as the average gains of 140 per cent on debut succumbed to declines on the second day.

All but four of the 25 debutantes on the Science and Technology Innovation Board, or Star board, fell on their second day of trading, with China Railway Signal & Communication scraping the bottom with its 18 per cent plunge.

“Trading on the Star market has been very speculative and retail investors seem to be behind it mostly,” said Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai. “These stocks will have a long way to go to return to normal valuations.”

The Star board, ordered up by President Xi Jinping in November 2018, was supposed to provide a market place for China’s technology start-ups to raise capital, and where the country’s retail investors – barred by capital controls from investing offshore – could enjoy the economic benefits of their growth.

To nurture the next unicorn, as companies with more than US$1 billion in valuation are called, the Star board did away with several listing rules that have hamstrung the country’s drive to attract new-technology listings: a cap on valuations at 23 times earnings, and a limit on how much stock prices can soar on debut.