Will Semiconductor jumps to allowable limit in debut trading, with more increases expected

Will Semiconductor, a designer and producer of semiconductor products, jumped by 44 per cent – the daily limit allowed in debut trading – on the Shanghai stock market, rising to 10.11 yuan from its IPO price of 7.02 yuan.

“Will’s stock price remains undervalued and will definitely reach its allowable limit tomorrow again,” said Wu Kan, fund manager at Shanshan Finance in Shanghai. ‘The low turnover today suggests that nobody is selling and there is strong absorption by the market.”

The Shanghai stock exchange imposes a daily price rise and fall limit of 10 per cent for stocks and mutual funds except on the debut trading day when the increase is capped at 44 per cent and the fall limit is 36 per cent.

Almost all Chinese IPO stocks have surged by the daily limit on debut. This is due to an undervaluation that results from an unwritten rule set by the China Securities Regulatory Commission – IPO prices are typically set at no more than 23 times of earnings, which is much lower than the price-earning ratio of most industries in the secondary market.

Will Semiconductor’s discount to other Chinese semiconductor makers in the secondary market is apparent, as Shanghai Belling is trading at 11.3 yuan, Tianshui Huatian Technology at 13.62 yuan and Beijing Sevenstar Electronics at 24.61 yuan, Wu said.

China’s semiconductor industry has long been a top priority for government policies, underlined by the emphasis in information activities and as low-cost smartphones designed in China flood the market. Both production and consumption revenues continued to outpace those of the global market, further solidifying its position as a key player worldwide.