China’s hottest bro­ker IPO shows rout can’t kill spec­u­la­tion

The Star Malaysia - StarBiz - - Foreign News -

HONG KONG: A 300% rally by a bro­ker­age stock in the mid­dle of a bear mar­ket may go against com­mon sense, but Tian­feng Se­cu­ri­ties Co has done just that with the help of spec­u­la­tive Chi­nese traders.

The Wuhan-based com­pany soared 328% in the 13 trad­ing ses­sions fol­low­ing its ini­tial pub­lic of­fer­ing (IPO), on track for the strong­est first-month per­for­mance for any Chi­nese bro­ker­age, ac­cord­ing to data com­piled by Bloomberg.

The Shang­hai Com­pos­ite In­dex rose 7% over the same pe­riod, but re­mains down about 25% from its Jan­uary high.

“Spec­u­la­tors are still chas­ing new shares, es­pe­cially those with low per-share prices,” said Lv Chang­shun, a fund man­ager at Bei­jing Da­jun Zhi­meng In­vest­ment Man­age­ment Co.

Tian­feng sold shares at 1.79 yuan apiece in Septem­ber, the low­est among A-share IPOs in the last 12 months, and the stock soared 44% on the first day of trad­ing Oct 19.

New stocks with low unit prices often at­tracted many Chi­nese in­vestors be­cause they looked cheap to them, Lv said.

In the last three years, the five Chi­nese firms that sold shares below 2 yuan apiece surged on av­er­age 644% in their first month of trad­ing, more than dou­ble the av­er­age re­turn of all 782 IPOs, data com­piled by Bloomberg show.

Traders have taken an in­ter­est in Tian­feng and vol­ume has be­gun to spike. The value of shares traded on Tues­day jumped to 2.99 bil­lion yuan (US$430mil), ex­ceed­ing that of China’s largest bro­ker­age Citic Se­cu­ri­ties Co, whose mar­ket cap­i­tal­i­sa­tion is more than five times Tian­feng’s.

Tues­day was the first ses­sion that Tian­feng failed to surge by the daily limit on a clos­ing ba­sis, a cap that typ­i­cally greatly re­duces trad­ing.

Tian­feng, which priced its share of­fer at 22.9 times 2017 earn­ings, is now trad­ing at a mul­ti­ple above 90, based on fig­ures from its list­ing prospec­tus. Citic Se­cu­ri­ties A-shares are trad­ing just un­der 20 times trail­ing earn­ings, ac­cord­ing to data com­piled by Bloomberg.

A rally in the bro­ker­age sec­tor, which started the day Tian­feng went pub­lic, also helped boost its per­for­mance, ac­cord­ing to Lv. “When the water level rises, ducks can swim higher,” he said.

Tian­feng was down 5.6% as the mid­day trad­ing break yes­ter­day in Shang­hai. — Bloomberg

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