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Source: www.asiaecon.org |


The most popular public offering this year was the shampoo company BaWang. Oversubscribed 446 times, the Shampoo company set its listing price at the top of indicative range, reaching the amount of $ 1.7 billion HG dollars for the share floatation. A total of 955.93 million shares of the company were traded today at $2.82-3.20 per share for a total of $2.88 billion.

Many companies have been putting their listing plans on hold because of the financial meltdown. But Bawang has several things going for it, which may explain the strong debut on Friday.

There are signs in Hong Kong that appetite for initial public offerings (IPOs) might be returning.

Analysts said it is certainly a good indication of a pick-up in demand for IPOs as Bawang shares were up by as much as 35 per cent at one point.

Francis Lun, general manager, Fulbright Securities, said: “Basically, they invest in a company and then baby-sit it to grow better so that their profit performance is at its peak just before listing, then they sell the stock and cash out several times their original investment. These are basically engineered, manufactured, listed companies, and I don’t like them, frankly.”

One other detail is that 700 million shares traded hands on Friday, suggesting that many were quick to lock-in on profits.

At HK$3.03 a piece, the stock is now trading at 22.5 times forecast earnings, almost on par with China’s biggest consumer stock, Hengan International.

“There’s a huge enthusiasm about IPOs, and especially in the consumer sector as everybody believes China has to rely on consumption, rather than exports, to spur growth,” Pu Yonghao, chief Asian investment strategist at UBS Wealth Management, said before the shares started trading.

Hong Kong’s benchmark Hang Seng Index has gained 27 percent this year as falling bank interest rates have made stocks more attractive to investors. The three-month Hong Kong Interbank Offered Rate declined to as little as 0.33 percent on May 21, the lowest since January 2005.

“The deposit rate is so low and everybody is concerned about potential inflation, so why not buy something with appreciation in the capital side and dividend yield?” Pu said.

 The extraordinary IPO may not simply have to do with pent-up demand for new stock. China’s GDP is now expected to grow at 7% or better this year. Since exports are down, the Chinese government stimulus package, which is based on a $585 billion investment in the economy, may be helping to push up consumer spending among the country’s huge middle class. Part of the stimulus program is meant to give the middle class better access to credit.

Source: www.asiaecon.org |

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