China’s high-flying technology board completes worst week since March amid crackdown as analysts recommend large-cap stocks to avoid regulatory risks

ChiNext index fell 7.2 per cent this week, the most since March, as Shenzhen exchange halted some unexplained high-flying stocks

Switching to cheaper big-cap stocks is timely to steer away from regulatory and valuation risks, analysts say

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A view of the Shenzhen Stock Exchange, where ChiNext-listed companies are traded. Photo: Sam Tsang

Published: 6:31pm, 11 Sep 2020Updated: 6:31pm, 11 Sep 2020

Shenzhen’s technology board posted its worst weekly performance in six months, with analysts recommending switching to big-cap stocks with cheaper valuation amid a crackdown on speculative trading of smaller companies.

The ChiNext index of start-up companies tumbled 7.2 per cent from September 7 for the steepest five-day loss since March. That compared with a 2.8 per cent drop in the benchmark Shanghai Composite Index, a gauge represented by some of the nation’s biggest companies.

Sentiment on the technology-heavy board soured as soon as the Shenzhen Stock Exchange took measures to rein in the speculative bets on some ChiNext-listed companies. Regulators halted trading of Xinjiang Tianshan Animal Husbandry Bio-engineering and other two companies, whose shares have surged in recent weeks for unexplained reasons, adding that they will keep monitoring unusual share price movements.

“The speculative mood is receding and the market is returning to rationale,” Yin Yue, an analyst at Yuekai Securities in Shanghai, wrote in a report. “Investors can watch low-valuation cyclical sectors. Banks, insurance companies and brokerages are all cheap in valuation and have the chance to play the catch-up.”

Chinese onshore stocks were among the biggest winners earlier this year before their recent wobble.

While ChiNext‘s 41 per cent rally this year is still the year’s best performer among major onshore stock barometers, Yuekai and Chasing Securities said it would be timely to rotate bets into cheaper, larger companies to avoid regulatory and valuation risks plaguing smaller companies.