China's red-hot initial public offering (IPO) market is cooling off. Of the 15 largest offerings to have debuted on the mainland this year, the share prices of eight are now below their first-day close, says The Economist.
In Hong Kong, Sinotruk (3808), China's number-three lorry maker, and dry bulk carrier Sinotrans Shipping (0368), both slid sharply on the first day of trading in late November; until 20 November, major flotations were returning an average one-day pop of 30%, says Lex in the FT.
An expected surge in mainland retail investor money into Hong Kong has been blocked by regulators, weakening the overall market, while international investors have become more risk-averse. Moreover, IPO prices had risen to unrealistically high levels.
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But now, "for the first time, you are seeing deals getting priced more sensibly", says Simon Aird of Credit Suisse, while it also bodes well that investors are paying more attention to whether a listing actually makes business sense.
As The Economist points out, China Railway, which needs cash to beef up China's ailing transport network, bucked the recent trend by surging in both Shanghai (601390) and Hong Kong (0390) when it listed last week
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