They propelled a little-known semiconductor manufacturer to a 521 per cent surge, traded a mid-sized railway company 13 times more feverishly than the world’s largest bank and valued a chipmaking-gear producer at an eye-watering 730 times earnings.

Chinese investors greeted the opening of the country’s Nasdaq-style equity market with a frenzied burst of trading on Monday, driving gains in all 25 companies that made their debut. The stocks jumped an average 140 per cent at the close in Shanghai, even as most slipped from their intraday highs. About 48.5 billion yuan (US$7.1 billion) of shares changed hands on the so-called Star board, or about 13 per cent of turnover in the rest of the market.

The new venue is China’s latest attempt to avoid losing the next Alibaba Group Holding Ltd. or Tencent Holdings Ltd. to exchanges in New York or Hong Kong. Endorsement from top officials helped generate such enthusiasm that firms raised a combined US$5.4 billion, about 20 per cent more than planned. Demand from retail investors has outstripped supply by an average 1,800 times, even as some analysts voiced concern over lofty valuations.

“Gains were much stronger than expected, either due to unreasonable IPO pricing or speculative trading,” said Zhu Junchun, a Shanghai-based analyst with Lianxun Securities Co. “It’s going to be a liquidity game in the first half year or one year of trading. Judging by the trading activity and gains on the board, it’s definitely a success.”

The board is also a testing ground for regulators, who have waived rules on valuations and debut-day price limits for the first time since 2014. The venue is the only one in China to welcome companies that have yet to make a profit, as well as shares with unequal voting rights. The Shanghai stock exchange will create an index tracking the firms about two weeks after the 30th listing starts trading.

The launch ceremony of the STAR board in Shanghai on July 22. Photographer: Sabrina Mao/Bloomberg

Shares on the Star board have no daily price limits for the first five trading days, followed by a 20 per cent cap in either direction. To limit volatility, the venue suspends activity for 10 minutes if a stock moves by 30 per cent and then 60 per cent from the opening price in the first five trading days, a wider band than the rest of the stock market. Only certain qualified foreign investors can buy the stocks directly, as there’s no access through trading links with Hong Kong.

The first batch of listings included China Railway Signal & Communication Corporation Ltd., whose Hong Kong shares sank on huge volume as traders switched into the A shares. Advanced Micro-Fabrication Equipment Inc., which was the most expensive listing of the batch, jumped as much as 331%. Its 171 multiple compared with an average of 53 times for the group, and 33 for similar stocks on other Chinese venues.

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Despite the hype, there are questions about whether the excitement will give way to the lukewarm sentiment that’s blanketing the world’s second-largest equity market. On the other hand, a sustained period of ultra-high demand risks draining funds from other exchanges, where volumes are shrinking. The Shanghai Composite Index fell 1.3% on Monday, while the ChiNext Index was down 1.7 per cent.

It’s not the first time China has sought to create an alternative venue for smaller companies. The ChiNext board was launched in Shenzhen almost a decade ago with fewer listing requirements than the main venues. The tech-heavy exchange was at the center of a spectacular boom and bust in 2015 that burned hordes of novice traders. Officials will be keen to avoid such extreme volatility -- the ChiNext remains more than 60% below its peak four years ago.

“I’m not going to participate in the Star board anytime soon,” said Qu Shaohua, managing director at Acroguardian Investment Co. “With prices at these levels it will take quite a long time for the market to fully digest the current valuation and adjust to a reasonable price.”

The Star board’s launch dovetails with Beijing’s pledge to boost direct financing for companies struggling to raise funds, and has taken on added significance as heightened trade tensions with the U.S. threaten China’s technology supply chain.

“I would say that the launch is a success,” said Fu Lichun, an analyst at Northeast Securities. “People are indeed quite enthusiastic, and maybe got a little over-excited at the open.”

--With assistance from Irene Huang, Lujia Yu, Fox Hu, Ken Wang, Ludi Wang and Michael Patterson.