Nov. 2 (Bloomberg) -- China’s stocks traded on the ChiNext startup board in Shenzhen plunged after surging on their Oct. 30 debut, challenging the ability of regulators to control volatility in the new bourse.

Huayi Brothers Media Corp., backed by Alibaba Group Holding Ltd. Chairman Jack Ma and director Feng Xiaogang, tumbled the daily 10 percent limit to 63.73 yuan after rallying 148 percent. Beijing Toread Outdoor Products Co., a retailer of camping and outdoor equipment, slumped 10 percent to 45.06 yuan after jumping 153 percent. Twenty of the 28 ChiNext stocks tumbled by the 10 percent daily maximum today.

Shang Fulin, chairman of the China Securities Regulatory Commission, said on Oct. 23 that trading on ChiNext was more likely to be “irrational” than other bourses. “Preventing risk is our main task,” Shang said. “We’ll make sure risk is estimated, detected and controlled.”

“I don’t think it’s safe for investors to buy any of those start-up companies for at least six months,” said Yan Ji, who helps oversee about $1.2 billion at HSBC Jintrust Fund Management in Shanghai. “Valuations are too high.”

The average price-to-earnings ratio among the 28 companies on the ChiNext is 70.76, compared with 33.1 for China’s benchmark Shanghai Composite Index and 21 for the S&P 500 Index. The value of the companies more than doubled on Oct. 30, according to Bloomberg data.

The ChiNext market has fewer listing requirements than China’s two main boards and was created as an alternative for smaller Chinese companies, such as Huayi, looking to raise funds.

The first 10 companies approved for share sales on the board raised 6.68 billion yuan ($978 million), double their initial target of 3.16 billion yuan.

To contact the Bloomberg News staff for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Zhang Shidong in Shanghai at szhang5@bloomberg.net

Last Updated: November 2, 2009 02:28 EST