ANGST among ordinary investors of Shenzhen GEM stocks

Level Playing Field: ChiNext investors are calling for stricter oversight of the new Shenzhen-based Nasdaq-like board. Photo: Internet

POTENTIAL AND existing investors left to dally amid the rally on China’s newest capital market are madder than heck, and they’re not going to take it any more.

A story in the Chinese media provides ample and often spirited feedback from shareholders in ChiNext (GEM) Board listcos -- an assortment of angst which reveals just how slighted ordinary retail investors lacking in high-level guanxi with the companies in question feel about the new board’s activities.

ChiNext was established six months ago to not only prop up capital-hungry midcaps looking to catch a Nasdaq-like rise to respectability and wealth, but also to provide alternatives to the established A-share mainboards.

Early-onset euphoria was the reaction from investors, who quickly poured in en masse and gave many of the original 28 listcos triple digit P/E ratios.

Now the new capital raising platform’s membership has grown to 66 members, with more on the way.

But thanks to recent corrections and a rough going earlier this week, P//E ratios are back down from the stratosphere and cooler heads are prevailing.

However, the flurry of new IPOs over the past half year on ChiNext and the enthusiastic response to their listings at the outset has left some complaining that those getting in on the ground floor were given “midnight passes” on the eve of the firm going public.

Outrageous Fortune

SinaFinance collected several standout comments from its online readers, with the news portal careful to state that contributors’ views do not necessarily express those of the media group.

Most complain that the disparity between announced IPO offer prices and the on-the-ground reality come listing morning can only mean that groups or individuals with strong ties to the listing candidate were given “midnight passes,” and their catbird seats on the eve of the deal made it very difficult for garden variety retail investors to make a decent buck come market opening.

Here are some of the more telling finger-on-the-pulse-like contributions:

Xiamen investor: A lot of ChiNext counters are spinoffs from established and powerful SOEs. They have management and board members with ties across a wide swath of industries and regulatory organizations, including no doubt those overlooking the bourse itself.

They have an unfair advantage and should be prohibited from listing.

Jiangsu investor: With all the obvious activity just before going public, especially share transaction turnover, something is undoubtedly amiss.

We should boycott the board until these matters are remedied!

Beijing investor: Regulations on the books call for thorough investigations of excessive pre-IPO activity and transactions. This includes prohibiting the top three shareholders from trading during this time.

I think violators should be banned from trade for a decade.

Shandong investor: The laws should not only be updated, but enforced! Violators should be ordered to hold their shares for 50 years to make an example of them, and it wouldn’t hurt to imprison them for 10 years as well.

Let’s see how this disincentive works on market behavior.

Sichuan investor: Does the Shenzhen GEM stand for the “greed expansion machine?” So far it has been a ripoff for ordinary shareholders lacking deep connections with the listed firm.

Fujian investor: The authorities should force those who profited by unfair means to return all money they received from ordinary investors, with interest.

Liaoning investor: Vague shareholding arrangements, numerous and shifting significant shareholders, disorganized management, lack of transparency in and around listing day… and reports that 20-somethings are becoming multi-millionaires on IPO maneuverings… is anyone really surprised?

Authorities need to take a closer look on where the money is coming from, and exactly when.

Jilin investor: With such drastic movements and overnight millionaires being made, many more are left frustrated on the outside. This is a matter of great concern due to its negative implications for societal order.

Something must be done.

Well, something is being done, but burned buyers like these no doubt think it's too little too late, or too slow altogether.

Six of the 66 firms listed on ChiNext have already been banned from trading until further notice for alleged irregularities like those referred to above.

Only time will tell if regulators take grievances from ordinary investors to heart… or with a grain of salt.

ANGST among ordinary investors of Shenzhen GEM stocks

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