Mainland IPOs spark investor frenzy

Zhang Xiuli says she knows nothing about the nine mainland companies that held initial public offerings last month.

Not a problem. Zhang, 37, tried to buy shares in each and every one, confident that she knew what was coming next: an immediate surge in price that has rewarded investors in mainland floats with an average first-day gain of 43 per cent this year.

Her orders were among 655 billion yuan (HK$824 billion) of bids for 3.2 billion yuan of new shares, an over-subscription rate 28 times bigger than that for the listing of Agricultural Bank of China at the height of the mainland offering boom in 2010.

New stocks have regained their reputation as cannot-lose bets on the mainland just four years after that last frenzy ended badly - a majority of offerings in the second half of 2010 saddled investors with losses within a year.

Ding Yuan, a professor of accounting at the China Europe International Business School in Shanghai, said regulatory efforts to ensure deals were not overvalued had led speculators to ramp up bets with borrowed money and hurt plans to let the market, rather than the government, set prices.

"The relationship between demand and supply is distorted," Ding said. "Fundamental analysis is meaningless because prices are kept low."