SF share rally result of idle speculation, economists believe

Cargo aircrafts of SF Express at an airport in Shenzhen, Guangdong province, Jan 30, 2015. [Photo/VCG]

The skyrocketing share value of SF Holding, China's largest courier company, has come back down to earth, but analysts are concerned that its low share trading value will continue to attract idle money for speculative activity.

The company has been increasing by the 10 percent limit for four consecutive trading days, but on Wednesday afternoon it slipped by 2 percent at one time and closed at 70 yuan ($10.18), for an increase of 4.79 percent.

Wang Wei, chairman and Founder of SF Holding. [Photo provided to China Daily]

The strong surge was stimulated by its backdoor listing on the Shenzhen Exchange market last week. The total value of the delivery service provider reached 292.9 billion yuan at close of play on Wednesday.

Its chairman and founder, Wang Wei, who holds about 68 percent of its shares, has become the third richest person in China, according to a ranking by Forbes.

But the rally is typical speculation activity associated with idle money, said Wu Biwei, chief executive of Futu Securities.

"Its trading circulation is very small, so it needs only a little capital to pull up its overall value."

SF Holding has only 133 million shares in circulation with total value of less than 9 billion yuan, accounting for only 3.2 percent of its total market value.

It has a small circulation market because the shares of the stockholders of the company and its reverse merger partner－accounting for more than 96 percent of the total－are locked up for one to three years, according to China's regulations.

Its high turnover rate at a short time is more evidence of speculative activities, said Wu. SF Holding's turnover rate was 24 percent on Wednesday.

Yang Delong, chief economist of Shenzhen-based Qianhai First Seafront Fund, also found its price-to-earnings ratio of more than 60 percent far exceeded the average on the ChiNext board and is concerned its growth rate is impossible to support.

The industry is facing fierce challenge. Another leader at China express industry, ZTO Express listed on the New York Stock Exchange, on Tuesday declined by over 10 percent due to its performance in the fourth quarter of 2016 has failed market expectation.