Seven Chinese IPOs Halt Trading After 44 Percent Share Rally; “It’s hard to change Chinese investors’ habit of speculatively trading in new shares”

January 22, 2014 Leave a comment

Seven Chinese IPOs Halt Trading After 44 Percent Share Rally

Seven of the eight Chinese companies that started trading in Shenzhen today were halted for a second time after gains exceeded limits set by the city’s exchange.

Shares of Zhejiang Wolwo Bio-Pharmaceutical Co. (300357), Chengdu Tianbao Heavy Industry Co., Guangdong Qtone Education Co. and four other companies were suspended from 10:30 a.m. until 2:57 p.m., three minutes before the close, after they jumped at least 44 percent from their initial public offering prices. All seven posted gains of 45 percent or more by the close. Hangzhou Sunrise Technology Co. (300360) climbed 19 percent, the only stock that wasn’t halted from trading.The Shenzhen Stock Exchange warned today of the risks in “blindly” speculating in IPOs. China, the world’s largest market for new share sales in 2010 with a record $71 billion raised, had the first IPO since October 2012 last week as policy makers drafted rules aimed at tightening supervision.

“It’s hard to change Chinese investors’ habit of speculatively trading in new shares,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Unless there’s an example of a debut company falling below its offer price, the practice won’t be stopped.”

Trading in shares of the seven companies were suspended as stock prices reached the threshold of a 44 percent move from their IPO prices, the level that’ll trigger suspension until three minutes before close on first-day trading by the Shenzhen exchange. Trading was initially halted for an hour after 9:30 a.m. as the shares exceeded the limit of a 32 percent gain.

Share Declines

Neway Valve (Suzhou) Co. (603699), the first company to start trading after the more than yearlong IPO freeze, has fallen 14 percent in two days since the shares jumped 43 percent on the first day of trading on Jan. 17.

Anhui Yingliu Electromechanical Co. (603308) said it will debut in the Shanghai Stock Exchange tomorrow.

China’s securities market hasn’t established a culture of rational investment, the Shenzhen Stock Exchange said in a statement on its website today. The China Securities Regulatory Commission announced an end of the moratorium on IPOs by the end of November, publishing new rules aimed at cracking down on over-pricing and make offerings more market-based. It has approved 52 companies for IPO sales so far.

The IPOS are testing the CSRC’s attempts to revive confidence in stocks after a 37 percent tumble in the benchmark Shanghai Composite Index (SHCOMP) during the past four years. The gauge gained 0.9 percent to 2,008.31 today after closing yesterday at its lowest level in more than six months. The Shenzhen Composite Index added 1.5 percent, paring this year’s loss to 1.4 percent.

–Zhang Shidong. Editors: Richard Frost, Allen Wan

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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