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Star Board Stocks Move into Second Phase of Bear Market
COVID-19 and China
A sculpture opposite the Shanghai Stock Exchange building. Image credit: Hao Qiuhui/EO Company

This week, the Shanghai Stock Exchange Star board market capitalization nosedived to the lowest since the trading got off on July 22. Five consequent days "in green" led the indicator to fall 13.97% from pre-opening CNY 701.79 billion (USD 98.90 billion) on August 19 to CNY 605.62 billion (USD 85.35 billion) by the moment when the closing bell rang on August 23.

"Technology", which comprises nine software, hardware, and semiconductor companies, had the largest negative contribution: the average decline in traded equity value was over CNY 547 million (USD 77 million) per company in this sector. Ronbay New Energy (688005.SH), the only new energy enterprise listed on the Star market so far, lost CNY 407.7 million (USD 57.46 million).

This is the first full-swing correction in the six-week history of the sci-tech venue. As a bear market approaches, the investors' interest in the sci-tech platform-listed stocks is fading. The number of buy-sell transactions in the marketplace has decreased by 22.49% compared with the previous week.

Chipscreen Biosciences (微芯生物, 688321:SH), the stock of which was flying with the P/E ratio of 1270 in the first trading week, saw the amount of hype halving this time: the number of transactions dropped 52%. One reason is that share price limitation (+-20% in daily trading) came into effect leading to more cautious trading behavior. 

AMEC (中微公司, 688012:SH), a semiconductor company with a sky-high P/E ratio, was traded 50% more intensively this week against the last one. Its stock has shown one of the sharpest drops, losing CNY 4.01 billion (USD 565.12 million) in the firm's market cap. Although the chipmaker's stock made a 5.43% leap on the news about the firm's outbound investment in its downstream counterpart Thursday morning, the overall weekly results are gloomy. 

The other four AMEC's microfabrication peers couldn't boast about their recent market performance either. They apparently turned to be the least resilient to the chops and changes happening within a trading cycle. Meanwhile, EqualOcean considers the chipmaker stock on the Star Market as a bellwether for the state of affairs in the key current intersection of tech and finance in China.

Montage Technology (688008:SH) lost over CNY 9.5 billion (USD 1.34 billion), or 11% of its value, this week; Espressif's (688018:SH) shares fell 12.21%, making the stock shrink by CNY 1.47 billion (USD 207.16 million); Anji Technology (688019:SH) and Amlogic (688099:SH), a new kid in town, lost CNY 1.33 billion (USD 187.43 million) and CNY 8.98 billion (USD 1.27 billion), or 15.03% and 18.77%, in market capitalization respectively.

The 28 stocks are expected to get back on track in the short term, meeting an inevitable market correction. Our high scenario entails their combined market cap to boost by 10-12% next week. There are some warning signs, however. For one, global tech and trade tensions are gaining momentum as the boat is rocked by the fundamental conflicts escalation and the current U.S. president's omnipresent tweets.

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