- Four are trading higher, but 21 of Monday's big winners declined in early trading
- Stocks on new STAR board can essentially rise or fall as market dictates for first five days of trading
All but four of those high-fliers on the new STAR tech board in China continued plummeting in afternoon trading on Tuesday, as investors took profits from jaw-dropping gains as high as 521 per cent at one point.
China Railway Signal & Communication, which specialises in train control systems, led the declines, with a 18 per cent loss to 10.1 yuan.
The stock surged 110 per cent from its offering price of 5.85 yuan on Monday, recording 9.8 billion yuan (US$1.4 billion) in transaction and making it the most traded stock in the China market.
The Nasdaq-style board sucked out money from other boards on its debut, accounting for one-ninth of all transactions in China markets.
Stocks on the STAR board are likely to experience volatile swings over the next few days but "will probably fall back to a reasonable valuation level" in the long term, according to Stanley Chan, research director at Emperor Securities.
"After all, the supply of listings is still limited now while investors' enthusiasm is high, so valuation is unlikely to crash all of a sudden," Chan said.
"The market needs time to get used to the fresh trading rules and the valuation levels of the stocks, so there's likely to be volatility at the beginning."
The board was the brainchild of Xi Jinping, who wanted to give a boost to home-grown tech start-ups.
Unlike China's regular boards, where IPOs are limited to a gain of 44 per cent on opening day and then are controlled by the up or down 10 per cent limit for all stocks, the STAR stocks can essentially go up as high as investors are willing to send them for five days.
With speculation rife in the comparatively young markets, the difference in potential spectacular profits partly explains the Monday rush. But some analysts are already questioning the high valuations of the pioneer stocks on the board, and raising red flags about potential losses.
Currently, northbound traders cannot invest in the STAR board, but Charles Li Xiaojia, chief executive of Hong Kong's stock exchange operator, has been pushing for the inclusion of the board in the Stock Connect programme.
Traders were beginning to return to the main boards on Tuesday.
The Shanghai Composite Index " which fell to a one month low Monday amid the stampede to the STAR board " advanced 0.3 per cent to 2,896.53 as of 2:15pm.
The Shenzhen Component Index rose 0.4 per cent to 9,156.9. The ChiNext Index of start-ups listed in Shenzhen gained 1.1 per cent to 1,532.21.
In Hong Kong, the Hang Seng Index recouped early losses to trade 0.3 per cent higher at 28,458.42.
Both the China and Hong Kong markets are suffering from a lack of direction since the Japan G20 summit at the end of June, during which China and the US agreed to resume trade negotiations and suspend tariff increases.
While investors in China are still evaluating the damage of the economic slowdown ahead of what is likely to be a stormy earnings season, traders in Hong Kong are increasingly concerned about the unprecedented violence that broke out over the weekend that could deepen ongoing social unrest.
"The Hang Seng Index is trapped in range-bound trading," said Chan. "The worsening atmosphere among local society has affected businesses like retail and property."
Listed Hong Kong retailers feel the pinch as trade war, protests weigh on sales
Seazen Holdings plunged by the 10 per cent maximum limit in Shanghai, while its Hong Kong-listed sibling Future Land Development fell 10.3 per cent to HK$6.83 in Hong Kong, after the company said it is exploring to sell its stakes in about 40 development projects "to actively respond to market changes".
The eighth-largest property developer in China is still reeling from the shock wave of the arrest of its founder and controlling shareholder Wang Zhenhua over allegations that he molested a nine-year-old girl. Since Wang's arrest on July 1, shares of the company have plunged by 28 per cent to close at 29.7 yuan on Monday.
In China, wind power equipment maker Shanghai Huitong Energy surged by the maximum 10 per cent of daily limit to 11.94 yuan, after announcing its controlling shareholder will increase its stake to 51 per cent from the current 30 per cent.
The shareholder, Dejin Enterprise Management, will buy the 21 per cent shares of the company at a price of 12.5 yuan apiece from the rest of the shareholders, according to a stock exchange filing last night.
Smartphone and home appliance maker Xiaomi Corp added 1.6 per cent to HK$9.09, after the company awarded each of its more than 20,538 employees and core contractors 1,000 shares.
While the decision was announced in a stock exchange filing on Friday evening, Xiaomi's founder and chief executive Lei Jun said in an internal letter on Monday that the shares were a gift to the employees as the company made it into the latest Fortune Global 500 list.
The awarded shares represent about 0.1 per cent of the company's total shares, according to the filing.
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