Eighteen Chinese companies – all small to medium-sized tech companies – took advantage of the new rules and started trading on Monday. By the market close, their shares had jumped over 200% on average. A medical equipment maker called Contec Medical Systems soared more than 1,000%, leading the gains.
Previously, companies often had to wait months, or even years, to meet with key regulators before they could hope to register on ChiNext. Now, these regulators have delegated much of this responsibility to the Shenzhen Stock Exchange, which dramatically reduces the wait and gives issuers and investors greater control over IPO pricing and timing.
Stocks that started trading on Monday will continue to trade with no limits on their price movement for the remainder of the week. Existing stocks, meanwhile, can now trade on ChiNext within a 20% range in either direction, double what was previously allowed.
“As the rivalry between China and the United States in the technology sector intensifies, China needs this reform [on ChiNext] to be successful, “Hao Hong, managing director and head of research at BOCOM International, wrote in a research note Monday. After all, technology leadership will require funding – and a lot. ”
He suggested, however, that it was too early to say how successful the reforms will be. Beijing still exercises a lot of control over its markets, and the value of stocks may be over-inflated at first.
“Since ChiNext reform is an important part of China’s grand competition strategy with the United States, conventional wisdom would see a good initial performance as a boost in national confidence,” Hong said. ” The [government’s] “Visible hand” will likely step in if the situation calls for it. ”
China doesn’t just use its domestic markets to support tech stocks. Hong Kong’s leading index compiler announced the creation of a new benchmark last month to track tech companies. And the city Index Hang Seng (, the main benchmark, will also soon add important technology stocks, such as )Alibaba (. )