Small investors likely to steer clear of Star Market ETFs as bubble concerns grip China’s Nasdaq

Individual investors ignore the upcoming sales of exchange-traded funds linked to the Star Market 50 index

The run-up on the Star Market is starting to falter as stocks are richly valued and pre-IPO shareholders sell stakes after the expiry of lock-up periods

Reading Time:3 minutes

The Star Market has lost momentum in the past two months, with the main index losing a combined 7.3 per cent. Photo: Reuters

Published: 8:00am, 21 Sep 2020Updated: 8:00am, 21 Sep 2020

Frank Chen is reluctant to invest in Ant Group and China’s other mega technology stocks, even though the accountant now has an option to bypass the asset threshold that keeps most individual investors like him away from these red-hot companies.

He can access the biggest companies trading on Shanghai’s new technology board, or the Star Market, as four asset-management firms start marketing the first batch of exchange-traded funds (EFT) tracking the board’s most valuable constituents this week. While the minimum subscription is only 1,000 yuan (US$148), Chen is wary of the one-year-old market because of its excessive valuation and wild trading.

“The valuation is too stretched and that’s probably why some mega listings keep falling after the start of trading,” said the 42-year-old Shanghai native. “That’s quite worrisome to me. There seems to be lots of speculative funds playing in this market.”

The tepid response from Chen underscores a setback for money managers who expect China’s 170 million small investors to be exposed to the 2.9 trillion-yuan Star board through their mutual-fund products. Like Chen, who has a 100,000 yuan stock portfolio, most individual investors are not qualified for trading on the Star market, as direct access to the tech board needs at least 500,000 yuan in dedicated stock accounts.

China Asset Management, E Fund Management, ICBC Credit Suisse Asset Management and Huatai-PineBridge Investments will accept subscriptions to the EFTs linked to the Science and Technology Innovation Board 50 Index on Tuesday. The cap for each fund is 5 billion yuan and the subscription will last for only one day.

Select Voice

Choose your listening speed

Get through articles 2x faster

1.25x

250 WPM

Slow

Average

Fast

00:0000:00

1.25x