ChiNext IPO debutant soars nearly 3,000 per cent on revamped tech board, but analysts fear speculative trading could hurt reforms
- Medical equipment maker Contec Medical Systems surged by 2,932 per cent on the first day of trading, with other 17 debutants all soaring, after the CSRC scrapped the daily cap on ChiNext IPOs
- Falling stock prices should be seen as a sign of healthy reform, according to Bocom International
The frenzied trading on Shenzhen’s ChiNext technology board that propelled a debutant stock by nearly 3,000 per cent on Shenzhen’s technology board could jeopardise the sweeping reforms by the regulator to further deregulate and cut trading restrictions on China’s three-decade-old stock market.
Contec Medical Systems, a Hebei-based medical equipment, jumped 2,932 per cent to an intraday high of 308 yuan from the offer price of 10.16 yuan on debut. At the close, the stock finished 1,061 per cent higher at 118 yuan, making it the best-performing debutant in the mainland since at least 2000.
The ChiNext companies are valued at 81 times reported earnings, almost five times as expensive as the multiple of the Shanghai Composite Index dominated by bigger companies, Bloomberg data shows.
“The ChiNext is expensive, and is no longer a price-discovery mechanism but a venue for speculation,” said Hong Hao, managing director with Bocom International Holding in Hong Kong. “Amid liquidity, speculation will unlikely dissipate soon. And falling stock prices, instead of rising, should be the sign of whether such a market reform is successful.”