Business Standard – China’s wannabe Nasdaq: China’s new growth-stock market has made quite an entrance. Shares of the 28 companies on Chinext, Shenzhen’s answer to the US Nasdaq, all at least doubled during their first half-day of trading. They were already priced at 40 times this year’s forecast earnings on average, compared to the 30 multiple at which Shenzhen’s main index trades. Chinese investors have got what they needed least: a chaotic hive of overvaluation.
In theory, a growth market makes sense for China. Savings could find their way to technology and services firms, which often miss out on government largesse and bank lending. That neglect belies their importance promoting innovation and driving consumption. Companies, most of them high-tech, instead tap overseas markets – which does nothing to help China allocate capital efficiently.
