China’s ChiNext Board, a Nasdaq-style index tailored for growth enterprises, is facing increasing bubble risk in a profit frenzy

October 10, 2013 Leave a comment

ChiNext faces bubble risk

English.news.cn   2013-10-10 14:09:57

BEIJING, Oct. 10 (Xinhua) — China’s ChiNext Board, a Nasdaq-style index tailored for growth enterprises, is facing increasing bubble risk in a profit frenzy, the China Business News reported on Thursday. During Wednesday’s trading, the ChiNext Index hit a historical high of 1,418.48 points before retreating slightly to close 2.03 percent up at 1,415.83 points. Compared to the start of the year, the index has increased more than 98 percent.The jump of the secondary market came against a backdrop of sluggish performance of the main board this year and almost one year of suspension of initial public offerings. The benchmark Shanghai Composite Index has slumped nearly 2.9 percent since the beginning of the year.

The report compared gains on the ChiNext Board to the lackluster profit of the 355 listed firms on the ChiNext with their half-year profits rising only two percent.

A two-percent profit increase cannot support a 98-percent rise of the ChiNext Index, according to the report.

Speculative capital has become active under the government’s general restructuring of the economy by eliminating and upgrading traditional industries while boosting emerging sectors such as those featured on the ChiNext Board with its listed companies in electronics, entertainment, games, and telecom.

Expectations for future growth of the board may be difficult to rationalize as speculation in the market has created a bubble, according to a report by the China Southern Asset Management, a Shenzhen-based fund management company.

The report by the company also warned that signs of profit-taking on the ChiNext Board are emerging, leading to bigger risks.

Filed under Macro Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment