For one 26-year-old investor, the launch of Shanghai's new technology-focused stock market has brought a huge windfall.
"I was not expecting too much, but my luck was good …I didn't look at the fundamentals," said Xu, who managed to snap up shares in one of the 25 companies to debut on the Star market on Monday.
Xu, who did not wish to give her first name, had Rmb2m ($434,183) to invest — a gift from her parents. She spent about half of it on Beijing Piesat Information Technology — a stock which rocketed along with several others on its first day of trading. "I woke up at 10am, and the share price had doubled," she said.
"It definitely surpassed my expectations. It was money that came from the heavens without me doing anything."
For Xu, it is a moment for celebration. A handful of company presidents who have become instant billionaires are also in luck. But this kind of overnight success, the holy grail of China's retail traders, bothers Beijing.
Authorities had set a minimum level of experience and resources for punters who wished to take part on the new exchange. The aim was to ensure that the right funding reaches the right companies at the right price — a longed-for sign of maturity for China's capital markets.
Until now, authorities have taken a firm hand, insisting, for instance, that stocks debuting in Shanghai or Shenzhen do so at a valuation multiple of no more than 23 times their previous 12 months' earnings.
"Star …lets bankers and companies sell at more market-driven prices," said Fraser Howie, a long-time follower of China's markets and co-author of Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise.
That policy has already led to some eye-popping valuations. Even after giving up some of Monday's gains on Tuesday, for example, chipmaker Anji's trailing P/E ratio stood at 158 times, according to Bloomberg. Intel of the US, by contrast, trades at 12 times.
The dramatic gains on Star echo the start of Shenzhen's own tech board, ChiNext, which launched a decade ago. The 28 companies that listed at its launch in 2008 doubled their share prices on the first day, yet the board never became the Nasdaq challenger officials had hoped for. Its benchmark index is down more than 60 per cent from its peak in 2015.
Still, analysts do not expect such prices to last. Zhou Liang of Shanghai Minority Asset Management, which has Rmb6bn under management and has raised funds mostly from high-net worth individuals to invest in Star stocks, said the first day's rises were "more than everyone expected," and that as follow-up batches of stocks make their debuts, valuations and returns on new listings should fall.
Authorities hope that more stringent requirements for individual investors — namely a trading account balance of at least Rmb500,000 and two years' trading experience — will also help the Star Market avoid the momentum-driven price moves seen on other bourses once daily price moves are capped at 20 per cent, starting next week.
Alexious Lee, head of China capital access research at CLSA, said early signs pointed to strong participation from institutional investors and high net worth individuals, as trading turnover on Star — less than one-fiftieth of the size of the Shanghai Composite Index, by number of companies listed — accounted for 12 per cent of all onshore equities trading on Monday.
He said Star's outsized share of the total reflected a rush to take positions, with Chinese institutional investors more bullish on the tech sector based on Beijing's moves to protect the industry in the face of tensions with the US. At a time when venture capital is cooling on Chinese tech companies, the backing of President Xi Jinping gives those listing on the new board a leg-up, he said.
On Tuesday, shares in the first 25 Star stocks slipped about 8 per cent on average — a small dent in the 140 per cent average rise seen on day one (Beijing Piesat was an outperformer, closing up 176 per cent). But the biggest remaining question for the board may be whether Beijing can bear to not interfere when share prices swing sharply lower.
Thomas Gatley, an analyst at research firm Gavekal, said that authorities have taken a more hands-off approach in recent years. But if stocks on Star take repeated tumbles in the weeks ahead, he said, it would provide fresh ammunition to advocates of intervention from China's "national team": a network of state-owned brokerages, banks and corporate giants at its disposal to pep up markets when necessary.
Gatley said he expected sharp falls soon, based on the high valuations currently attached to the first batch of Star listings, but he recommended authorities hold off as long as they can from intervening.
"If they can weather this first part of the storm it should be completely fine," he said.
Written by: Hudson Lockett, Wang Xueqiao and Tom Hancock
© Financial Times