© Reuters. FILE PHOTO: The sign of the STAR market is seen after the first batch of companies has been listed on the Shanghai Stock Exchange in Shanghai
By Andrew Galbraith
SHANGHAI (Reuters) – The largest shareholders of the new Chinese STAR's Nasdaq-style market lost $ 1 billion on the second trading day on Tuesday, a day after the board debut.
All but four of the 25 market-listed stocks fell as investors took profits from opening profits, which erased about 9% of total market capitalization.
The new board stormed out on Monday and some stocks even rose 520%. Frenzied purchases more than doubled the board's total capitalization from 225 billion yuan to 529 billion yuan at the end of the day.
While second-day movement faded in comparison, declines were strong enough for STAR's top five individual shareholders According to Reuters calculations, including billionaires newly formed on Monday, a total of 6.94 billion yuan is on paper lost, although no one has lost his claim to a three-decimal fortune.
The falls were led by the China Railway Signal & Communication Corp (SS :), which recorded the sharpest decline of the day at 1
But even after this decline, equities were 71% higher than their initial public offering price.
Espressif Systems (Shanghai) Co. (SS :), a manufacturer of wireless communication chips, led the daily gain, up 14.2%.
Yuwei, fund manager at Olympus Hedge Fund Investments Co, said STAR's market valuations may remain frothy in the near term, but would expect further declines over the next two to four weeks.
"This is a serious bubble," he said. "Valuations do not support fundamentals, foamy valuations benefit major shareholders, but retail investors are burned."
Yuan hoped that regulators would not unduly disrupt trade and market forces would play their part. The board is operated by the Shanghai Stock Exchange.
The STAR market, modeled on the tech-savvy Nasdaq, is expected to fuel both capital market reforms, including a US IPO system, and a way to boost domestic technology companies in a destructive trade war with the United States.
In order to give market forces a greater role in pricing, trade rules are stricter than in other Chinese markets. In the first five days of trading in new shares, there are no daily price limits. (For more details on the STAR market, see Factbox.)
However, some major investors have been advised to be cautious, especially in the early years.
"Although the STAR market will serve as a strategic vehicle for national financial reform, it will still be going round Lynda Zhou, chief investment officer and portfolio manager of Fidelity International, said in an email about market volatility and irrationality in the early stages:" Also institutional investors must remain calm and return to the fundamentals.
The market debut, in which equities rose by an average of 140%, exceeded even the expectations of seasoned traders accustomed to swinging wildly in the country's largest stock markets.
Shanghai Stock Stock Exchange On Monday, turbocharged margin loans were traded and investors raised a total of 1.51 billion yuan ($ 219.38 million) to increase their purchasing power.
Margin credit data for Tuesday was not yet available
There is currently no index to track the STAR market, but the Shanghai Stock Exchange announced that it will launch one on the 11th trading day of the board following the debut of its 30th company.