Hong Kong toymaker Quali-Smart surged in its trading debut yesterday after heavy subscription by the city's retail investors, signalling strong appetite in the market for new listings and sparking IPO hopes for more firms. The company, which was the most oversubscribed of all the companies that launched initial public offerings in nearly 20 months, finished its first day on the floor up 10.7 per cent at HK$1.66. "Retail investors don't quite care about the fundamental of IPO stocks right now. They'll buy anything, especially small-cap ones as they are usually more volatile and easier to make a quick buck," said Castor Pang, head of research at Core Pacific-Yamaichi. Speedy Global, another small-cap firm that debuted last week, surged 39 per cent on its first day. Golden Wheel Tiandi, which also debuted last week, jumped 21 per cent on debut. Quali-Smart shot up 38 per cent during the morning session yesterday but investors decided to lock-in profits later in the day. A Hong Kong-based fund manager who refused to be identified, said one of the reasons that triggered the sell-off in the afternoon was that the share price had become "severely overbought" and the morning rally created a serious mismatch between the company's fundamentals and the the stock's price. "Margins are squeezing in the toy industry as labour costs rise and the industry is already very crowded," he said. Quali-Smart manufactures toys primarily on an original equipment manufacturer (OEM) basis, or for other big brands, such as LeapFrog and Tollytots. The company said its profit stood at HK$47.7 million for the year to March 2012, against HK$9.5 million the previous year. Quali-Smart's Hong Kong offering was 721 times oversubscribed, the highest since second-hand luxury handbag retailer Milan Station's flotation in June 2011. It had priced its shares at HK$1.5, at the top end of its indicative range, and raised HK$90 million by selling 60 million shares. Speedy Global's retail tranche was oversubscribed by 425 times.