Growth Enterprise Market (GEM) is the brand new stock exchange of China. It is a NASDAQ style stock exchange aimed at providing finance to smaller companies.
It started trading last Friday, and on the first day of trading — created 13 paper billionaires. 28 companies listed on the GEM, aka ChiNext, and they rose between 76% and 210% in the first day of trading.
It’s another thing that 25 out of these 28 companies fell on the second day, and many of them fell by as much as 10% (which was the lower limit).
I read a few articles about ChiNext or GEM, and there were several things that caught my eye:
- Volatility: The first thing that I noticed was volatility. Anyone following the Chinese IPO market will not be surprised by it, but it’s hard to not take notice of. China’s IPO market is the biggest in the world right now, and the IPO market is really hot there. Given this backdrop, regulators were expecting volatility, and it seems they have created some rules to curb speculation, and have warned investors that they will crack down on aggressive speculation.
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