New | China’s IPO frenzy is back as speculators chase the momentum
Of the 13 stocks that made their trading debuts this week in Shanghai and Shenzhen, every single one surged by their allowable 44 per cent limit on the first day
China’s investment frenzy in initial public offerings (IPOs) is back, as a dearth of investable options in the country’s capital markets and excessive cheap money chase after the returns from first-day stocks trading.
Of the 13 stocks that made their trading debuts this week in Shanghai and Shenzhen, every single one surged by their allowable 44 per cent limit on the first day.
“This is like gambling - very risky,” said Ken Wong, an Asia equity portfolio specialist at Eastspring Investments. “These investors are driven by momentum, rather than fundamentals. ”
The frenzy is a radical departure from last year, which had a slow start in IPOs following a 2015 market rout. The number of companies that sold stock last year rose to 227, from 219 in 2015, while the proceeds from the IPOs declined 6 per cent to 150 billion yuan (US$21.8 billion).
One in every five of last year’s IPOs, or 48 of them, hit the 44 per cent price increase limit on their debut, and had their trading suspended in Shanghai and Shenzhen.
