For months, it has been a no-brainer for Chinese investors: Buy shares of newly listed companies, sit back and watch your money grow.
A limit-up gain of 44 percent on opening day was all but guaranteed, thanks to regulatory pressure on companies to keep the prices of offerings low, and it did not stop there. Half of the initial public offerings this year through the middle of last month jumped more than 300 percent in their first month.
Now, those cannot-lose bets are looking vulnerable.
The Bloomberg China IPO Index dropped 10 percent from its high on May 27 through Wednesday, while all 10 of this month’s worst-performing companies in the benchmark Shanghai Composite Index are IPOs from this year.
Jiangsu Broadcasting Cable Information Network Corp, which peaked at 197 times earnings after 23 straight days of post-IPO gains, has since lost 39 percent.
The turnaround is a sign that China’s equity rally has gone too far too fast as investors lose confidence in some of the market’s best performers, according to BNP Paribas (China) Ltd.
Even after its recent slump, the Bloomberg China IPO index is up 178 percent this year, versus a 54 percent gain for the Shanghai Composite.
“Investors are becoming more fearful than greedy,” said Chen Xingdong (陳興動), the lead economist and head of macro-economics research at BNP in Beijing.
“Stock prices have gone too high despite weak economic growth,” Chen added.
Granted, early investors in this year’s IPOs are still sitting on gains, with none of the shares having dropped below their offering prices.
If analysts’ estimates are any guide, investors have not yet lost appetite for buying into IPOs before they start trading: Offerings this week will lure about 6.7 trillion yuan (US$1.1 trillion) of bids, according to a Bloomberg survey of forecasters.
“This game is not over yet,” said Steve Wang, lead China economist at Reorient Financial Markets Ltd in Hong Kong.
“People will return to it as market conditions improve,” Wang added.
Skeptics are concerned that valuations are overstretched. China’s market capitalization has almost tripled in the past year to US$9.5 trillion, despite projections for the weakest annual economic expansion since 1990. At 101 times reported earnings, the median stock on Chinese mainland exchanges is now more expensive than when the Shanghai Composite peaked in 2007.
Some of this year’s new shares are even pricier. Dalian Energas Gas-System Co (大連派思燃氣系統有限公司), which soared 870 percent since listing in April, has a price-to-earnings multiple of 158. Chongqing Zaisheng Technology Corp’s (重慶再生科技) ratio is 121 after surging 998 percent since January. Both stocks are among the biggest losers in Shanghai this month, with declines of at least 25 percent.
The Shanghai Composite dropped 3.7 percent at its close yesterday, while the China IPO index sank 4.3 percent.
“The valuation is becoming less and less sustainable,” NAB Private Wealth Advisory investment director Norman Chan (陳德霖) said in a Bloomberg Television interview in Hong Kong. “Further upside is limited.”
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day
Thousands of parents in Singapore are furious after a Cordlife Group Ltd (康盛人生集團), a major operator of cord blood banks in Asia, irreparably damaged their children’s samples through improper handling, with some now pursuing legal action. The ongoing case, one of the worst to hit the largely untested industry, has renewed concerns over companies marketing themselves to anxious parents with mostly unproven assurances. This has implications across the region, given Cordlife’s operations in Hong Kong, Macau, Indonesia, the Philippines and India. The parents paid for years to have their infants’ cord blood stored, with the understanding that the stem cells they contained