ISSUES coming on line since the listing requirements were relaxed four years ago have been significantly underpriced, according to a study compiled by the City Polytechnic of Hong Kong. The authors claim that investors have less information on companies tapping the market for funds in the wake of the changed rules, and require lower prices to compensate for the implied uncertainty. But that will change over time, the academics forecast. Authors Cheung Yan-leung, S.L. Cheung and Richard Ho Yan-ki note in their report: ''It is found that the initial public offerings were not underpriced before the implementation of the new listing rules but were significantly underpriced after the introduction of the new listing rules. ''The underpricing phenomenon is also common to both small and large issues. There is, however, a tendency for the underpricing phenomenon to become weaker over time.'' The listing rules were introduced in December 1989, cutting the minimum track record of operations that had to be published to three years from five and halving the minimum market capitalisation to $50 million. They also stipulated that shareholders had to approve before voluntary delistings could take place. Stock exchange listing division head Herbert Hui Ho-ming said: ''The exchange always takes the view that pricing is a matter for the market to decide, and is between the controlling shareholder and the sponsors. It is a commercial decision. ''From our point of view, clearly we want to make sure as much information as possible is being disclosed to the market and the move from five years to three is in line with international standards currently prevailing.'' The polytechnic report focuses on the findings of an earlier study by Rock which suggests that flotations are like the winner's curse, in that uninformed investors are given a disproportionately large allocation of the overpriced issues and, likewise, small allocation of the underpriced ones. It says: ''New issues are thus systematically underpriced to induce uninformed investors to participate in the new issue market: that is, the losses incurred by uninformed investors from the allocation of overpriced issues is compensated by the gain fromthe allocation of underpriced issues.'' But adjusting excess returns to factor in the rationing of allotments suggests that Hong Kong does not conform to Rock's model, as small and uninformed investors receive returns significantly bigger than the risk-free rate. Although the change in listing rules is put forward as a reason for the changed returns, the authors also cite other factors in the excess returns since 1989: The greater supply of flotations in recent years. The higher risk rating on Hong Kong stocks following the Tiananmen Square crackdown. But the authors conclude that in the case of the 99 flotations launched after the implementation of the changed listing rules, small to medium investors received very high excess returns. ''While the underpricing phenomenon may be caused by the uncertainty introduced by the new listing rules, there seems to be a convergence towards the prediction made by Rock's model in so far as the underpricing phenomenon is getting weaker over time,'' it says.