But the party was over almost before it started. By Friday Jiang – and many other early Star Market investors – was licking his wounds after seeing the shares tumble from their day-one highs as the early promise of a market perceived as a potential launch pad for China’s own versions of Microsoft and Apple turned to dust.

“As a seasoned stock investor with more than 20 years of experience, I believed that shares of the companies would keep rising for at least five days when they started trading,” said Jiang, the former manager of a state-owned company in Shanghai. “I am currently stuck with paper losses, but still believe that the losses can be recovered in the near future.”

Jiang is one of the 4 million individual investors eligible to buy and sell stocks in the much-heralded new market. Like many others, he had not been able to get his hands on shares at the IPO stage, such was the enormous demand amid giddy expectations for the debutant start-ups. So he did what he thought was the next best thing and bought his shares soon after launch, chasing the early rally.

What he had not foreseen was that the rally was all but done by that point.

He bought 1,000 shares in Western Superconducting for 54 yuan (US$7.85) each just after trading had commenced. Although he got in early, the stock price of the superconducting material producer had already jumped more than 260 per cent.

They hit an intraday high of 65.6 yuan at 10:30am on Monday but then fell back to finish day one at 54.99 yuan, up 266 per cent from the IPO price.

They have since lost 15.1 per cent, finishing Friday at 46.6 yuan, which translates into a 7,400 yuan paper loss for Jiang.

Trade war? No, the US and China are vying for technological supremacy

Jiang is fairly typical of China’s vast army of experienced, often elderly, individual stock market investors. Prone to overexcitement and making ill-judged, impulsive decisions, they pose a problem for regulators bent on bringing stability to the famously volatile domestic markets.

Their often wild speculative bets have led many observers to compare the country’s domestic markets to casinos.

Jiang’s seemingly misplaced faith in the Star Market, after frenzied IPO sales and feverish anticipation, was bolstered by the fact it was ordered into existence by the Chinese President last November. He still believes it will recover.

“This is a new market under President Xi Jinping’s directions, and it will be a disgrace if a boom-to-bust cycle happens right after the inauguration,” he said. “Another rally will occur soon.”

Nonetheless Jiang admitted that he had been too optimistic about the market’s performance because of the fanfare that greeted the first batch of technology companies to list on it.

“I was convinced of the political implications, since the leadership would like to see a rosy start for the new market,” he said. “But the fundamentals of the companies might not have been enough to support the elevated prices after a more than 100 per cent surge on Monday morning.”

The supercharged first-day gains and ensuing volatility are likely to have served as a stark reminder to China’s securities watchdogs of the scale of the challenge they face in maintaining market stability.

The funding platform is designed to boost the country’s promising technology start-ups in the hopes they will go on to become global superstars.

But the roller-coast ride during the first two trading days was a reflection of how the sheer enthusiasm of small players to get hold of IPO shares could eventually derail market-based reforms even among regulators’ massive efforts to make the capital market more transparent.

On Monday, the 25 debutants posted stellar gains of 140 per cent on average before 21 of them saw their shares tumble the very next day.

Many bounced back, but none rediscovered the highs of Monday morning.

Indeed, the overall performance in week one was good. The average gain of the 25 firms was 140 per cent from their IPO prices.

The frenetic buying and selling seen in the early stages will not be possible from Monday when the shares will be subject to a daily trading limit of 20 per cent.

“As always, priority is given to stability when a new board starts trading in China,” said Wang Feng, chairman of financial services company Ye Lang Capital. “But taking measures to ensure stability could undermine efforts to implement market-based reforms.”

Shanghai Stock Exchange said it could have stepped in to halt trading if wild price swings threatened market stability during the first five days. It did not make use of this power.

Analysts said a PE ratio of more than 100 is still within regulators’ acceptable level since the first batch of companies, ranging from microchip makers and biotechnology start-up to manufacturers of electrode material used in lithium-ion batteries, are deemed the most solid technology companies among the 150-odd IPO candidates.

They are believed to be the profit stars of the future with the leadership’s supportive measures such as tax incentives in the pipeline.

The buzz around the Star Market started even before it began trading. The initial public offering shares on offer by the 25 firms were so sought-after that they were 1,690 times oversubscribed.

Analysts said it remains to be seen whether the new board will be another speculators’ market, similar to the ChiNext that Beijing established in 2009.

Beijing had originally hoped to create its own technology giants via the launch of the ChiNext market, but it was not to be.

The first batch of 28 companies listed on the ChiNext board at the Shenzhen Stock Exchange surged 106 per cent on average on the first trading day, but then tanked in the following days, leaving millions of investors out of pocket.

To avert a similar roller-coaster ride on the new technology board, the securities regulators set a minimum capital requirement of 500,000 yuan for retail investors.

But the threshold proved no barrier to the enthusiasm of investors to buy technology companies in industries that are of vital importance to China’s future development now that the trade war is likely to see more mainland firms strangled by American technology and material suppliers.

“I don’t believe that a roller-coaster ride will take place on the Star board ,” said Davis Zhang, another Shanghai-based retail investor who is keen to trade stocks on the new board. “I will buy in the coming days if trading appears to be flat. It is politically correct to buy given President Xi’s support to the board. Otherwise it will be an embarrassment to the leader.”

Star Board gets off to shining start as all debutants see share prices soar

BNP Paribas said in a research report that some foreign investors had shown interest in tracking the stocks listed on the new board.

Some of the Star Market companies will eventually be selected to trade via the Hong Kong-Shanghai Stock Connect, giving them access to additional money from investors outside the mainland.

Bourse operator Hong Kong Exchanges and Clearing said on Friday international investors will be able to trade in stocks listed on the Star Market through the Stock Connect schemes under an agreement between the exchanges in Hong Kong, Shanghai and Shenzhen. It, however, said a date for implementation will be announced later.

Under the agreement, the Stock Connects will extend to include A shares issued by the companies listed on the Star Market and their H shares issued in Hong Kong for cross-border trading, according to the HKEX.

Presently, foreign investors can trade shares on the new board via the qualified foreign institutional investors (QFII) and renminbi qualified foreign institutional investor (RQFII) systems.

“It now gives investors access to smaller, innovative companies and it expands our investment universe to earlier stage growth companies and higher growth subsidiaries of some existing strong franchises,” said Tiffany Hsiao, a portfolio manager at Matthews Asia in San Francisco.

(Corrects spelling of portfolio manager’s surname in last paragraph.)