SMIC shares soar in Shanghai, in a successful debut that may give more Chinese stocks confidence to leave US market
- SMIC shares opened at 95 yuan, compared with its IPO price of 27.46 yuan
- Stock surge follows a week of buying euphoria in the broader market
The chip maker’s shares surged as much as 246 per cent to 95 yuan when they began trading in Shanghai, versus its initial public offering (IPO) price of 27.46 yuan. They closed at 82.92 yuan on the Star Market, a technology board that allows unlimited two-way price swings on the first five trading days.
The market upswing was given a tacit approval earlier this month when China Securities Journal said the A-share markets had the criteria and foundation for a healthy gain. The rally was needed to foster economic recovery, attract foreign investment and compete with other markets, the journal added.
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Dozens of company executives, investors and industry consortium leaders were invited to the listing ceremony at the Shanghai exchange on Thursday morning, sitting on chairs that were sparsely lined up at the trading floor.
No media organisations were invited to the event in what a company official described as a move to limit the number of participants to prevent the spreading of the coronavirus. SMIC was aiming for a “low-key”, he added, without elaborating.
Chairman Zhou Zixue said the listing reflected that the Star Market’s importance to so-called red-chip firms, or mainland companies incorporated overseas, to facilitate fundraising, according to an industry official who attended the listing ceremony and who declined to be identified.
SMIC is backed by the government-linked entities, a situation that has provoked accusations of unfair playing fields by western governments. State-owned Datang Telecom Technology & Industry Holdings is its single largest holder with a 16.3 per cent stake.of the company.
The China National Integrated Circuit Industry Investment Fund, created by the government in 2014 to bolster the development of home-grown technologies and acquire overseas patents and designs, has a 2.23 per cent stake and is investing 3.5 billion yuan in the company, SMIC said.
“Semiconductor companies are the darling of Chinese investors nowadays as tension between the US and China escalated,” said Ivan Li, a money manager at Shanghai-based Loyal Wealth Management. “The battle in the technology field, particularly in chip-making, has largely fuelled Chinese investors’ enthusiasm in home-grown manufacturers.”
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The offering price pegged the company at 109 times its 2019 earnings, based on the expanded share base, according to its exchange filing. By comparison, rival Taiwan Semiconductor Manufacturing Co had a trailing price-earnings ratio of 21 times.
JP Gan, a founding partner of Ince Capital, said the Star Market offers a venue for promising Chinese firms to raise capital and expand their businesses.
“Some companies traded on the market will derail from the track,” he said. “But when innovation and risk taking are encouraged, a large number of failures should be tolerated as long as a few great companies can emerge.”
With additional reporting by Zhang Shidong in Shanghai
