Two apparel makers debut in Hong Kong, Shanghai with returns as stark as night and day
The first day trading outcomes of two garment makers in Shanghai and Hong Kong are like night and day, due to the different mechanism and investment attitude in the two markets.
On their debut trading day, Ribo Fashion shot up a staggering 44 per cent on the Shanghai Exchange, while rival Speed Apparel tumbled below its listing price in Hong Kong. The opposing fates of the two similar companies and IPOs stemmed from what analysts described as the difference in the mechanism and investment fashion of the two markets.
Ribo Fashion soared immediately after the market opened and touched the daily increase limit of 44 per cent just 30 minutes into trading. It closed at 10.2 yuan, up from its IPO price of 7.08 yuan. The Shanghai-based maker of women’s apparels raised 424.8 million yuan, selling 60 million shares.
In contrast, Speed Apparel, which debuted on the Growth Enterprise Board in Hong Kong, fluctuated between gains and losses throughout the trading day. It ended at 49 Hong Kong cents, below its listing price of 50 Hong Kong cents. The Hong Kong-based knitwear supplier raised a net HK$37.1 million through its IPO.
“Basically, it’s because the IPOs are underpriced and there is a limited supply of deals on the market,” he said.
Mainland IPO shares are priced at no more than 23 times earnings to ensure that there will be take up and the stocks will rise on their debut, according to unwritten regulatory rules.