China’s IPOs lost their debut sizzle in 2022, boding ill for punters betting on a few quick yuan
- 28 per cent of small-cap newcomers in mainland China fell below their IPO prices on first day of trading in 2022, up from 4 per cent in 2021
- IPO registration system could be extended to big-cap listings, according to speculation, hurting the prospects for first-day windfalls
Some 116 or 28 per cent of the 415 newcomers on all mainland bourses last year fell below their initial public offering (IPO) prices on their first day of trading, according to data compiled by Shenwan Hongyuan Group, versus only 4 per cent in 2021.
Sichuan Biokin Pharmaceutical, this year’s first IPO in Shanghai’s tech-heavy Star Market, rose 11 per cent, a pale shadow of what used to be a common 44 per cent pop, while Xinlei Compressor, the first listing on the ChiNext board of fledgling start-ups in Shenzhen in 2023, fared better with a 33 per cent gain.
Recent changes in IPO price-setting rules have prompted punters to rein in their enthusiasm, some analysts said. Fatigue from months of pandemic-induced losses has also sapped appetite for risk taking. This could persist as Beijing pushes for more reforms to match global market practices.
“IPO valuations are now more market-based, which has narrowed the room for big profits from new listings,” said Lin Jin, an analyst at Shenwan Hongyuan, a Shanghai-based brokerage. “It would become more frequent for new stocks to trade below their IPO prices.”