China’s STAR market, a bourse designed for domestic high tech companies to raise funds at home, opened on Monday. All of the 25 companies that are listed on STAR saw upward jumps in their share prices in the morning of their first day of trading.
By 11:00 a.m., the stock prices of all 25 companies fluctuated so dramatically that at least one trading suspension was triggered and lasted for ten minutes, according the Shanghai Stock Exchange.
Approaching the end of pre-noon trading, at 11:03 a.m., semiconductor maker Anji Technology led with a gain of nearly 450%. At the morning session’s close, the stock prices of all companies had at least doubled.
Stocks in the STAR market are allowed to rise or fall without any caps, a feature differentiating this tech board from others. In comparison, the main board has a 10% limit for price gains or losses. However, investors who put their money into a STAR stock will be required to hold their shares for at least one business day after acquiring them.
The regulators have also set a 10-minute suspension mechanism to cool off major upward or downward swings—and remind investors of escalating risks — when a stock’s price rises or falls by 30%. If a stock’s momentum remains unmitigated after this pause, another suspension will take place when it hits a 60% change. Afterwards, no more halts will be instituted in the same day of trading.
STAR stems from a decision made by the Chinese central government in November, giving unprofitable companies the opportunity to go public. It also allows dual class shareholding structures. This has opened the door for tech firms to seek out new capital from retail investors. Previously, tech companies such as Alibaba, Baidu, and Tencent were listed in either the United States or Hong Kong.
STAR also has a faster registration listing process than other bourses in China. By June 5, a total of 119 companies have applied to be listed.
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