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China's ChiNext stock market, a long-awaited Nasdaq-style second board that aims to turn local start-up firms into budding Microsofts or Intels, kicked off trading on Friday with strong gains, in line with expectations.
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The first batch of 28 companies made their listing debut on ChiNext, part of the Shenzhen Stock Exchange in southern China, with share price gains of 46 percent to 123 percent at the opening compared with their initial public offering prices.
Film producer Huayi Brothers Media Corp was the biggest gainer, rising 123 percent to 63.66 yuan.
Market expectations held that at least one-third of stocks would more than double on their first day of trading. It is typical for IPOs listing in Shenzhen to double or triple on the first day of trade because of their low capitalisation.
The 28 listees, almost all private companies in contrast with the state-owned corporations that dominate China's main board, completed IPOs over the past several weeks at prices averaging a hefty 56 times 2008 earnings.
Analysts estimate their average price/earnings (PE) ratio based on forecast 2009 earnings is around 40 times.
Investors were not deterred by the high prices, however, and the companies raised a combined 15.5 billion yuan ($2.3 billion) from their IPOs with an average oversubscription ratio of more than 120 times.
Analysts have expressed worries that excessive valuations fed by enthusiastic investors may rattle Chinese stock markets over the next few months, although they expect official steps to curb rampant speculation to spare ChiNext the risk of failure that befell other start-up markets.
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