SHANGHAI (Reuters) – The largest shareholders in the new Nasdaq-style STAR market of China lost a cumulative $ 1 billion on the second trading day on Tuesday, one day after the roaring debut of the board created three new billionaires.
All but four companies of 25 stocks listed on the market have fallen as investors earn profits from daybreaks, erasing about 9% of total market capitalization.
The new board stretches outside the doors on Monday, with some surging shares up to 520%. Purchasing more than double the board's total capitalization was more than 225 billion yuan at 529 billion at the end of the day.
While the size of day two moves is considered equivalent, the decline is sufficient enough for the five largest individual shareholders of the STAR, including new billions minted Monday, to lose a combined 6.94 billions of yuan on paper, according to Reuters calculations, although there were no claims on three-quarters of wealth.
The Falls are dominated by China Railway Signal & Communication Corp (SS :), which slipped to 18.4%, the highest drop of the day.
But even after this collapse, its shares were 71% higher than their initial public offer (19659004) Espressif Systems (Shanghai) Co. (SS :), a manufacturer of wireless communications chips, which led to day gain, rising 14.2%.
Yuwei, fund manager at Olympus Hedge Fund Investments Co., said that STAR Market valuations may remain dimmed for a short period of time, but he expects to see more drops in the next two to four weeks .
"This is a serious bubble," he said. "Estimates do not support the bases. Essential shareholders benefit but investors will burn."
Yuan said he hoped the trade regulators would not interfere and allow market forces to play their role. The board is managed by the Shanghai Stock Exchange.
Created to echo the tech-heavy Nasdaq, the STAR Market is intended to be the same driver of market market reforms, including a US-style IPO system, and a way to promote technology companies at home in the midst of a destructive trade war in the United States.
In order to give market forces a bigger role in setting prices, trading rules are much weaker than other markets in China. There is no daily price limit on the first five trading days in new stocks. (For more details on STAR Market see Factbox)
But some major investors are advised to take precautions, especially in the early discussions.
"Although the STAR Market serves as a strategic deployment for national financial reform, market volatility and injustice in early stages," said Lynda Zhou, China equity chief investment officer and portfolio manager at Fidelity International on a email note.
"Even investors in the institution need to remain calm and return to the fundamentals of investing," he said.
The debut of the market, which saw stocks posted by average gains of 140%, exceeded the expectations of veteran traders who were used in wild swings in the country's largest market.
Data from the Shanghai Stock Exchange showed loan loans turbocharged trading on Monday, with investors lending a total of 1.51 billion yuan ($ 219.38 million) to boost their purchasing power.
Margin margin data for Tuesday
There is no index at present to track STAR Market, but the Shanghai Stock Exchange said it will launch one of the 11th trading day board, following its debut 30th company.