Star listing of domestic tech firms is seen as an attempt to bypass US markets in trade war

This article is more than 1 year old

This article is more than 1 year old

China’s tech industry has received a vote of confidence from domestic investors after shares in Shanghai’s new Nasdaq-style stock exchange rose by up to 520% on their debut.

The launch of the Star listing of domestic tech firms is seen as China’s answer to the US’s premier tech index, and an attempt to sidestep American markets in Beijing’s long-running trade war with Washington.

It is also considered to be a bold step towards financial market reform, as the Star market features a US-style system for initial public offerings (IPOs).

Inaugural trading on Monday involved an initial batch of 25 companies, including chipmaker Anji Microelectronics Technology, which surged 520% from its IPO price in morning trading. That was despite shares having been suspended twice throughout the day by circuit breakers meant to slow a burst in trading.

Suzhou Harmontronics Automation Technology soared 113% from its listing price, despite falling 30% at the market opening. The average stock increase across the index was 140%.

The moves are rare for Chinese firms, as most local stock markets cap share price gains trading at 44% during the first five days of trading. The new Star market has no such limit. Rules have also been loosened for trading after the initial five-day period, with Star shares allowed to rise or fall by as much as 20% compared with the 10% cap across other lists.

The Shanghai stock exchange confirmed earlier this month that it had received 141 applications from companies eager to list on Star, which is a loose acronym for the Sci-Tech Innovation Board. The firms chosen for the initial launch reportedly raised more than 37bn Chinese yuan (£4.3bn) by issuing new shares on Star.

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Elsewhere, Shanghai’s composite index fell 1.3% while Hong Kong’s Hang Seng index dropped 1.15%. Fiona Cincotta said it was a sign that Star’s launch “seemingly sucking out interest and liquidity from the other markets.”

Investors were also reacting to anti-government protests over the weekend. More than 400,000 people joined a pro-democracy march on the streets of Hong Kong on Sunday afternoon, amid anger over an extradition bill and violent police tactics aimed at protesters. The march descended into chaos, with police firing teargas and masked men attacking protesters at a train station after the march.

Star’s launch is seen as Beijing’s attempt to drum up support for its tech industry amid waning support from the US.

High tech companies, including those listed on Star, are not directly targeted by existing US trade tariffs, but simmering tensions between Washington and Beijing have had wider implications for the industry.

In May, President Donald Trump instructed the US treasury department to label telecoms giant and smartphone maker Huawei a threat to national security. The designation causing a number of US firms to distance themselves from the firm.

Trump has so far introduced tariffs on $200bn of Chinese goods – impacting products ranging from fresh peaches to kerosense, air conditioners and parking meters. The US president has also threatened to slap levies on on all remaining Chinese imports, worth over $300bn, but those additional levies have not been introduced.