‘Speculative Trading’ At China’s Star Market: A Threat to its Ambitions?
To attract a greater number of tech listings, China’s new trading venue was launched in Shanghai. The aim of the new tech board is to make the acquiring of funds more accessible and easy for high-tech companies in China. Yet, the speculative trading at China’s new tech exchange has already started to cast doubts on its ambitions.
Star Market, Shanghai’s new Science and Technology Innovation Board, is run by the Shanghai Stock Exchange and is meant to ensure that domestic technology innovators have enough resources at home to develop. It relaxes rules pertaining to trading and listing guidelines, in hopes to provide an alternative to the Nasdaq Stock Market.
A batch of 25 companies has started trading at the new facility, most of which have already registered substantial gains. It is expected that the hype around the Star Market and the chances of big gains will encourage those investors who failed to achieve greater gains initially.
Despite the reported performance of the Star Market, analysts have presented increasing concerns over its long-term potential. They believe that the investors’ mindset is fixated on achieving short-term gains thereby limiting the extent to which a bet is made based on the companies’ fundamentals.
Analysts have also doubted the potential of Star Market to achieve its ambitions because of the uncertainty around whether the market forces will be allowed to play an important role. They attribute this skepticism to the historical record of Chinese authorities intervening whenever stock prices abruptly fall.
Lynda Zhou, a portfolio manager at Fidelity Institutional, acknowledged the launch of Star Market as one of China’s most strategic financial deployment. She rendered it as a move towards triggering more market-oriented practices in the country and attracting a wide range of investors in the days to come. She also, however, suggested institutional investors be patient and practice the fundamentals of investment in periods of uncertainty and volatility during the early phases.
The tech exchange has garnered a lot of state support and continues to draw more. With more flexible and less stringent listing requirements, the Star Market intends to strike the domestic technology giants as a hospitable venue and an alternative to tech listings overseas.