(Yicai Global) Jan. 29 -- Around 13 percent of companies listed on the Shanghai and Shenzhen stock markets were trading below their issue price as of yesterday, according to the latest data, indicating that as the country’s stock market system matures and more firms go public, the trend is not necessarily upwards as before.

The stocks of 554 firms listed in Shanghai and Shenzhen have now fallen below their offer price, according to Chinese stock information provider East Money Information. Of these, 20 percent have halved in value and nearly 5 percent have dropped by more than 70 percent.

This includes 33 companies that went public last year, half of which debuted on the Shanghai stock exchange’s Nasdaq-style Star Board, the report said.

The new, quicker registration-based system that was introduced at the Star Market and the Shenzhen bourse’s ChiNext Board last year has led to a surge in the number of listed stocks and the total financing amount, a representative from a securities firm told Yicai Global. The main bourses still use the approval-based system which has to pass through regulators and can take years to come through.

"The flood of new share sales has taken up a lot of the trading capital, plus the fact that institutional investors tend to band together and aim for high quality targets, meaning that smaller cap, low-performing stocks have become less popular and their prices have dropped below par,” the rep said.

In previous years, when there were fewer new entries, newly floated shares tended to gain sharply on their debut which encouraged market speculation.

"It has become normal for stock prices to fall below their issue prices on the Star Market and ChiNext board," said Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology. This can force the market to be more cautious in determining the pricing of initial public offerings and is not necessarily a bad thing, he added.

As more stocks fall below their offer price, even on their first day of listing, it will test the ability of securities firms to screen, judge and evaluate the value of companies, the representative said. It reflects badly on the brokerage if the stock they sponsor drops in value.

Poor performance is the main reason why stock prices fall. Traditional industries account for a large proportion of these, including clothing and home textiles, chemical products, automobiles and parts as well as the steel sector.

Last year, Shanghai and Shenzhen IPOs hit CNY472.6 billion (USD73.2 billion), the highest in a decade with the listing of 399 companies, according to Wind statistics. Nearly half of this came from the Star Market.

Editors: Tang Shihua, Kim Taylor