Seven of the eight Chinese companies that started trading in Shenzhen today were halted for a second time after gains exceeded limits set by the city’s exchange.
Shares of Zhejiang Wolwo Bio-Pharmaceutical Co. (300357), Chengdu Tianbao Heavy Industry Co., Guangdong Qtone Education Co. and four other companies were suspended from 10:30 a.m. until 2:57 p.m., three minutes before the close, after they jumped at least 44 percent from their initial public offering prices. All seven posted gains of 45 percent or more by the close. Hangzhou Sunrise Technology Co. (300360) climbed 19 percent, the only stock that wasn’t halted from trading.
The Shenzhen Stock Exchange warned today of the risks in “blindly” speculating in IPOs. China, the world’s largest market for new share sales in 2010 with a record $71 billion raised, had the first IPO since October 2012 last week as policy makers drafted rules aimed at tightening supervision.
“It’s hard to change Chinese investors’ habit of speculatively trading in new shares,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Unless there’s an example of a debut company falling below its offer price, the practice won’t be stopped.”
Trading in shares of the seven companies were suspended as stock prices reached the threshold of a 44 percent move from their IPO prices, the level that’ll trigger suspension until three minutes before close on first-day trading by the Shenzhen exchange. Trading was initially halted for an hour after 9:30 a.m. as the shares exceeded the limit of a 32 percent gain.
Neway Valve (Suzhou) Co. (603699), the first company to start trading after the more than yearlong IPO freeze, has fallen 14 percent in two days since the shares jumped 43 percent on the first day of trading on Jan. 17.
China’s securities market hasn’t established a culture of rational investment, the Shenzhen Stock Exchange said in a statement on its website today. The China Securities Regulatory Commission announced an end of the moratorium on IPOs by the end of November, publishing new rules aimed at cracking down on over-pricing and make offerings more market-based. It has approved 52 companies for IPO sales so far.
The IPOS are testing the CSRC’s attempts to revive confidence in stocks after a 37 percent tumble in the benchmark Shanghai Composite Index (SHCOMP) during the past four years. The gauge gained 0.9 percent to 2,008.31 today after closing yesterday at its lowest level in more than six months. The Shenzhen Composite Index added 1.5 percent, paring this year’s loss to 1.4 percent.
--Zhang Shidong. Editors: Richard Frost, Allen Wan
To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at email@example.com