China’s version of Nasdaq under pressure as LeEco financial crisis spills over to listed arm
With a 3.41 per cent weighting on the ChiNext Index, a Leshi stock plunge after trading resumes could drag the whole market down
The unfolding financial crisis at China’s tech giant LeEco, which once saw itself as a potential rival to US peers including Tesla and Apple, is weighing on the country’s 5 trillion yuan (US$735 billion) ChiNext board – a Chinese version of the US Nasdaq, say analysts.
Trading in Leshi shares has been suspended since April 17 when the company announced plans for a restructuring. According to the latest rules issued by China’s securities regulator in mid May, trading suspensions of listed companies should be for no more than three months if such a suspension was made in relation to asset restructuring.
That makes the trading resumption of Leshi “one of the biggest risk hanging over the ChiNext board now,” said Yin Jun, who runs a private hedge fund in Shanghai.
“The company used to be a bellwether for trading on ChiNext. Even though investors are growing aware of the risks related to Leshi, we are concerned that once trading is resumed, the company will face a stock price crash, which would drag down the index,” he said.