China IPOs Are Usually a Safe Bet. Not Anymore

China IPOs Used to Be a Safe Bet. That’s Not the Case This Year

Fox Hu

13 Nov 2019, 04:47 PM IST

(Bloomberg) -- More and more investors are starting to lose money on China’s initial public offerings, which have long been seen as among the world’s safest bets.

Eight stocks debuting this year have dropped below their offer prices in the first six months of trading, the most in seven years, according to data compiled by Bloomberg. A handful of other stocks are trading at just a few percentage points above water.

Among the worst performers are chemical producers Ningxia Baofeng Energy Group Co., which has plunged 21% since listing, and Shandong Yuanli Science and Technology Co. with a 17% slump.

In 2014 to 2016, all IPOs had positive returns in their first six months of trading, data compiled by Bloomberg show. The number of losers rose to six last year from two in 2017.

But there was a time when losses were the order of the day. New-share performances were so bad in 2012 that China’s securities regulator froze the IPO market for about 16 months from September that year. Almost half of the 154 stocks listed in 2012 fell below their offer prices in the first six months of trading amid tight monetary conditions.

Credit is looser today, but evoking 2012 is an abundant supply of new shares that looks set to outstrip speculative demand. China’s IPO machine is running at full steam to meet funding needs, with about $27 billion raised so far this year and a new board to serve technology startups.

UPCOMING LISTINGS:

Alibaba Group Holding
- Hong Kong exchange
- Size up to $15b
- Expected to start bookbuilding Nov. 15 and set final price Nov. 20
- Credit Suisse, CICC
Postal Savings Bank of China
- Shanghai exchange
- Size $4.1b
- Taking orders Nov. 28
- Citic Securities, CICC, China Post Securities, UBS Securities
Pharmaron Beijing
- Hong Kong exchange
- Size up to $588m
- Pricing Nov. 21; Listing Nov. 28
- CLSA, Goldman Sachs, Orient Capital
Heaven-Sent Gold Group
- Hong Kong exchange
- Up to $180m
- Pricing Nov. 18, listing Nov. 25
- CLSA
Bangkok Commercial Asset Management
- Thailand stock exchange
- Size at least $700m
- Listing date TBA
- Trinity Securities, Kasikorn Securities
Sinic Holdings Group
- Hong Kong stock exchange
- Size up to $287m
- Listing expected Nov. 15
- ABC International, Huatai Financial
Longyan Zhuoyue New Energy
- Shanghai Star board
- Size $191m
- Took orders Nov. 11; listing date TBA
- Yingda Securities

More ECM situations we are following:

Alibaba Group Holding Ltd. has won approval to forge ahead with a Hong Kong share sale that could raise at least $10 billion, according to a person familiar with the matter
Baby formula maker China Feihe edges lower in debut Wednesday after raising $855m in Hong Kong IPO
Hanwha Systems drops as much as 8.6% in debut Wednesday following $337m IPO in South Korea
Lever Style slumps as much as 19% in debut Wednesday following $19m Hong Kong IPO