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.
