Shares on Shanghai’s newly-launched stock exchange have rocketed 520%, as domestic investors show faith in the country’s tech industry.
Twenty-five companies comprised the first batch of firms to the STAR Market, which launched Monday to give investors an alternative to New York or Hong Kong.
But as brands like Anji Microelectronics Technology, a Shanghai-based semiconductor firm, leapt 520% on its starting price, experts warn that the low-regulation market might already have caused a volatile bubble.
STAR, part of an attempt by the Chinese government to implement open-market reforms, includes an option for tech companies to launch U.S.-style IPOs. That has enticed some of the country’s most promising firms—141 are reported to have applied for listings.
Shares may also rise or fall by as much as 20% after the first five days of trading, a huge change from the 10% permitted on other Chinese exchanges. Unprecedented investor activity on STAR has sucked interest from other domestic markets, too: Hong Kong’s Hang Seng index slumped 1.15%, while Shanghai’s composite fell 1.3%.
The news represents some much-needed good news for the Chinese economy, which is threatened by another round of U.S.-led tariffs set to affect everything from metals to food.
Yet amid the “wild” investment, some analysts are warning investors against putting too much faith in STAR, which may take time to find its financial balance.
“For anything new in China, there is a tendency for retail-oriented markets like China to overly speculate,” Eugene Qian, president of UBS Securities, told CNBC. said. He added that STAR speculators faced a “short-term bubble”