Shares drop as new IPO causes worries
Print Edition
Shanghai stocks fell yesterday as investors were wary of the initial public offering of Neway Valve (Suzhou) Co, the first company to list domestically after a 14-month freeze on IPOs.
The Shanghai Composite Index dipped 0.93 percent, or 18.75 points, to 2,004.95. The index ended the week down 0.41 percent.
The new shares of Neway Valve were much sought-after, and high demand propelled the price up more than 30 percent, triggering a 30-minute trading halt.
Neway closed at 25.34 yuan (US$4.20) yesterday, 43.5 percent up from its offering price of 17.66 yuan.
The rise in a new stock on the first day is limited to 44 percent of its offering price.
The industrial valve manufacturer raised 1.46 billion yuan by selling 82.5 million shares. Neway priced its IPO at 46.5 times 2012 earnings, higher than an average of 34 times of its peers.
“Funds were chasing after new shares after a long IPO suspension and this affected the overall market,” said Nanjing Securities.
Around 50 companies have received regulatory approval to go public after the regulator last month lifted the 14-month moratorium.
However, some companies have postponed their IPOs as the securities regulator tightened supervision on the IPO process in order to crack down on overpricing.
The China Securities Regulatory Commission will not review new IPO applications until March.
CITIC Securities said in a report yesterday that IPOs this month may raise 54.4 billion yuan, which will hurt the market. It sees the impact easing in February as the regulator controls the issuance pace.
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