Oct. 30 (Bloomberg) -- Huayi Brothers Media Corp., the first movie maker to put action stars Jet Li and Jackie Chan in the same film, is a hit with Chinese investors.

The Beijing-based company, backed by Alibaba Group Holding Ltd. Chairman Jack Ma and director Feng Xiaogang, rallied 148 percent today as trading began on a new board in Shenzhen for smaller companies. All other 27 stocks on the ChiNext market also advanced.

Huayi, the producer of movies including “The Forbidden Kingdom” starring martial-arts actors Chan and Li, and “The Banquet” with actress Zhang Ziyi, trades at about 124 times earnings. By that measure, the stock is 12 times as expensive as Time Warner Inc.

“China’s stock market has this tendency of chasing everything new,” Zhang Xiang, Guodu Securities Co.’s Beijing- based chief strategist, said before trading began.

The ChiNext market, which has fewer listing requirements than China’s two main boards, was created as an alternative for smaller Chinese companies, such as Huyi, looking to raise funds. Chinese companies including Baidu Inc. have sold stock on the Nasdaq Stock Market because they couldn’t meet requirements of the main boards in Shanghai and Shenzhen for three years of annual profit before listing.

Nurturing Movie Makers

Huayi, founded in 1994 and controlled by brothers Wang Zhongjun and Wang Zhonglei, was valued at 11.9 billion yuan ($1.7 billion) at the close in Shenzhen. The company’s profit rose 17 percent to 68 million yuan in 2008 as sales almost doubled.

The average price-to-earnings ratio among companies on the ChiNext is 77, compared with 33 for China’s benchmark Shanghai Composite Index and 21 for the S&P 500 Index. The value of the 28 companies more than doubled today, according to Bloomberg data.

“We want to find companies with value and the most potential to grow,” said Xie Jing, a fund manager who helps oversee $732 million at China Nature Asset Management Co. in Shanghai. “The start-up board certainly provides us with more alternatives to diversify our investment.”

China is encouraging the development of its film industry to help local movie makers compete with overseas producers such as Time Warner Inc.

China Film Group Coup., the only authorized importer of foreign movies, selects only a few among almost 1,000 overseas films each year for local distribution. The nation allowed foreign companies to invest in local television and film production companies in 2004.

‘Irrational’ Trading

The first 10 companies approved for share sales on the ChiNext board raised 6.68 billion yuan, double their initial target of 3.16 billion yuan. Shang Fulin, chairman of the China Securities Regulatory Commission, last week warned that trading on the new board may have a higher probability of becoming “irrational” than on other bourses.

Among other ChiNext companies, Lepu Medical Technology (Beijing) Co. closed 119 percent higher to 63.40 yuan; Beijing Toread Outdoor Products Co. rose 153 percent to 50.07 yuan; and Anhui Anke Biotechonology (Group) Co. soared 195 percent to 50.08 yuan.

“We’ll make sure risk can be estimated, detected and controlled,” Shang said in Shenzhen during an Oct. 23 ceremony before the opening of ChiNext.

China last introduced a new market for stocks in June 2004, when Shenzhen’s board for small and medium-sized companies began trading. Zhejiang NHU Co., the first company listed on the board, almost doubled in its trading debut.

The Shenzhen Stock Exchange, which will also host ChiNext, introduced rules in July for its board of small and medium-sized companies that require stocks to be suspended for 30 minutes if they rise or fall by more than 20 percent on debut from the opening price.

A second 30 minute halt kicks in when the stock rises or falls by more than 50 percent, with a final halt of the stock until 2:57 p.m. local time if stocks soar or plunge by 80 percent. Chinese markets end trading at 3 p.m.

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Last Updated: October 30, 2009 03:23 EDT