New shares pull down China markets
By Winny Wang |
February 3, 2010, Wednesday
|
Print Edition
Print Edition
CHINA'S stock markets slumped under a heavy supply of new shares in January when a record 37 companies launched initial public offerings, dampening enthusiasm in buying new shares and pushed authorities to revise the pricing mechanism.
The 37 companies raised a combined 46.97 billion yuan (US$6.88 billion) from the main boards and ChiNext, hitting a record high since 2004, according to Zero2IPO Research Center.
The heavy share supplies caused the A-share market to plunge 8.76 percent last month to become the worst performing market in the world.
A total of 95 companies were lining to float shares on the mainland by the end of last month after gaining regulatory approval for their IPOs. Out of the total, 10 companies had received subscriptions and another 12 firms had set a timetable for subscriptions, the research house said.
"Massive supplies and overpriced new stocks push the equity markets into a vicious circle," said Soochow Securities Co.
The gloomy market narrowed the growth of new stocks, while their higher valuation further narrowed opportunities for them to grow in the secondary market, Soochow said. The offer price's average price/earnings ratio has already doubled to 60 from the previous 30.
China XD Electric became the first mainland-listed stock in five years to fall below its offer price on its trading debut last week, followed by China Erzhong Group (Deyang) Heavy Industries Co which fell 4.12 percent yesterday on its first day of trading.
The lackluster investor response to IPOs prompted a reform of the pricing mechanism to control the high valuation of new stocks.
Zhu Congjiu, assistant to the chairman of the China Securities Regulatory Commission, blamed profit-driven institutions of proposing a price in the book-building process to raise IPO prices.
The 37 companies raised a combined 46.97 billion yuan (US$6.88 billion) from the main boards and ChiNext, hitting a record high since 2004, according to Zero2IPO Research Center.
The heavy share supplies caused the A-share market to plunge 8.76 percent last month to become the worst performing market in the world.
A total of 95 companies were lining to float shares on the mainland by the end of last month after gaining regulatory approval for their IPOs. Out of the total, 10 companies had received subscriptions and another 12 firms had set a timetable for subscriptions, the research house said.
"Massive supplies and overpriced new stocks push the equity markets into a vicious circle," said Soochow Securities Co.
The gloomy market narrowed the growth of new stocks, while their higher valuation further narrowed opportunities for them to grow in the secondary market, Soochow said. The offer price's average price/earnings ratio has already doubled to 60 from the previous 30.
China XD Electric became the first mainland-listed stock in five years to fall below its offer price on its trading debut last week, followed by China Erzhong Group (Deyang) Heavy Industries Co which fell 4.12 percent yesterday on its first day of trading.
The lackluster investor response to IPOs prompted a reform of the pricing mechanism to control the high valuation of new stocks.
Zhu Congjiu, assistant to the chairman of the China Securities Regulatory Commission, blamed profit-driven institutions of proposing a price in the book-building process to raise IPO prices.
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