More Chances to Get Rich Quick in China's New Stock Venue
More Chances Coming to Get Rich Quick in China's New Tech Market
(Bloomberg) --
Investors who missed out on the most profitable trade in China’s equity market will soon have another chance at making a quick buck.
The second round of listings on Shanghai’s new technology board opens Thursday as two companies are set to price their shares. With a third firm entering the fray Monday, this small batch may raise a combined 3 billion yuan ($437 million), according to their initial targets. The first 25 listings raised $5.4 billion -- about 20% more than planned -- with retail demand exceeding supply by about 1,800 times on average.
The so-called Star market opened to much fanfare Monday less than a year after President Xi Jinping first touted the project. It’s the only venue in the country where stocks can move freely on the first day of trading, increasing the potential for huge gains. Based on closing prices, flipping the stocks on the first day would have returned an average 140%. That could mean even greater competition for the second round.
“The first batch of listings proved to be quite a lucrative trade, so the demand for the second batch will be quite strong,” said Raymond Chen, a money manager with Keywise Capital Management (HK) Ltd. “It’s like a lottery -- once you win the subscriptions it’s a sure win.”
The new offerings include Shanghai Friendess Electronic Technology Corp., which produces laser motion-control systems, and Amlogic (Shanghai) Co., a maker of semiconductors. Shenzhen Chipscreen Biosciences Co., which makes cancer treatments, will set its price on Monday. Subscriptions for all three open next week, and they’re expected to start trading in early August, though no timetable has been set yet.
The average valuation for the 25 debutantes was more than twice as high as the regulatory cap of 23 times earnings that’s been imposed elsewhere in China since 2014. All Star board stocks remain above their debut price, despite a slight wobble on day two. Some 139 funds got into trouble for being too keen on the first batch, subscribing to more shares than allowed by the regulator.
The second round of pricing will indicate whether demand for new shares remains high, especially after Monday’s first-day bump minted three new billionaires. Shanghai Friendess and Amlogic are likely to sell their shares at multiples of at least 45 times last year’s earnings, according to reports sent by their respective sponsors to institutional investors this week.
The listed stocks closed up 4.6% on Thursday, according to a Bloomberg-complied index that’s weighted by market value.
"The second batch of Star board listings will attract everybody’s attention," said Fu Gang, fund manager at Shanghai River East Asset Management Advisory Ltd. "The IPO frenzy will continue thanks to the overwhelming outcome of the first batch."
To contact Bloomberg News staff for this story: Ken Wang in Beijing at ywang1690@bloomberg.net;Amanda Wang in Shanghai at twang234@bloomberg.net;Mengchen Lu in Shanghai at mlu157@bloomberg.net
To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, David Watkins
©2019 Bloomberg L.P.
With assistance from Bloomberg