1,700% share surge for Chinese state-owned compressor maker exposes risks of new listings

Bourse operator dampens ShenGu Group frenzy, but large population of individual investors and exchange rules make IPO speculation likely

A more than 1,700 per cent share-price surge by a new listing on the Shanghai Stock Exchange last week put a spotlight on a state-owned industrial compressor manufacturer, leading the bourse operator to intervene to curb speculative trading.

ShenGu Group, a maker of centrifugal compressors in northeast China’s Liaoning province, grabbed headlines when its stock soared 1,216 per cent from its offer price two days after it began trading on September 17, with an intraday high on the second day of trading translating to a 1,781 per cent surge.

The frenzy triggered immediate action by the Shanghai bourse, which said on Monday that it would closely watch the stock and take disciplinary action accordingly. On Friday, the exchange suspended some trading accounts that it said had caused the abnormal movement. ShenGu also issued an exchange statement warning of the investment risk.