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China’s Newly Made Mini-IPO Market Starts, Triggers Circuits

China’s Newly Made Mini-IPO Market Starts, Triggers Circuits

On Monday, China’s new mini-IPO market went LIVE and showed uncontrollable wild behaviour by investors and traders. Although the price drop is scarce in IPOs in China, a lot of debut stocks encountered circuit breakers in both prices upward and down.

China made several reforms in its already dead New Third Board to aid the nation’s small organisations to raise capitals easily and smoothly through the new IPO platform to develop a generation of innovative firms.

The first day of trading, in which around 32 companies debuted, shares collected more than 1.06 billion pounds (around 9.5 billion yuan) through the first round of IPO. It was primarily featured by massive volume and high volatility. 

In China, more than 80% of the urban jobs are from the private sector, and the reform is taken to channel the needed capital into high potential, innovative start-ups amid the coronavirus pandemic. 

The Chinese financial regulators are trying to build a multi-tiered capital market, and the New Third Board is created to become a feeder for other stock markets like Shenzhen’s ChiNext and Shanghai’s Star Market.

Out of the total 32 debut companies on the first day of the IPO market, 20 firms’ stock fell, and the other 12 went upward, until lunch break. The initial public offering of these 32 firms was oversubscribed 172 times, on average. 

The New Third Board, which almost lost its lustre and faded away after some initial excitement, got back its charm again and attracted more investors. As per this reform, qualified private companies are allowed to open their stocks for a public listing on the board, and more kinds of investors are allowed access to the market, including mutual funds. 

Among the 32 stocks, vaccine maker pharma company Winsun Bio leapt more than 64% and was the best performer of the day. Many other stocks triggered their circuit breakers after rising and falling for more than 30 or 60%. Ningxia Kai Tian Gas Development Company fell around 16%.  

China Asset Management Co. launched the first mutual fund product of this new mini-IPO market and the general manager of the company, Li Yimei, cited the reform in the board as important to the restructuring of China’s economy.

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