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* All three shares rise by maximum amount
* IPOs were oversubscribed by 120-218 times
* Reflects robust demand for new shares
SHANGHAI, June 26 Shares of three small Chinese
companies soared by over 40 percent in their debuts on Thursday
in the first mainland listings in over four months, highlighting
the challenges the stock regulator faces in weeding out
speculation and curbing volatility in the market.
In a sign of strong demand for new shares, all three
companies rose by 44 percent by mid-morning from their IPO
prices, the maximum amount allowed on the first day of trade.
The China Securities Regulatory Commission (CSRC) resumed
the IPO market earlier this year after halting listings for 14
months. But after a two month flurry of activity, no offerings
were approved until early June, when seven companies, including
the three that debuted on Thursday, got the go-ahead.
The CSRC has said it will stop involving itself in IPO
pricing and move to a registration-based system similar to that
employed in developed economies where the market effectively
decides who gets to list and for how much.
However, the watchdog has so far kept a tight leash on
supply and pricing, announcing earlier this year that companies
which set their IPO price-to-earnings (PE) ratios higher than
the ratios of industrial peers in the secondary market will need
to publish repeated risk warnings before they open subscriptions
to retail investors. It has also carried out spot checks on
price consultations and pre-marketing of IPOs.
"A lot of regulators try not to interfere in the IPO price
and there is a lot of reason to support this trend, but China
has its own special economic arrangement," said Ringo Choi a
partner at Ernst & Young.
"The CSRC has its own reasons to monitor pricing, so the
stock market will not overheat, which is in line with the
general planned economic policy in China."
Last month, state media quoted the head of the CSRC as
saying about 100 IPOs were expected for the rest of this year,
which would bring the full-year tally up to 150, about half the
number forecast by consultants including PwC.
While the regulator's move to control pricing will help
protect investors from getting burned by buying mispriced IPOs
as has happened in the past, it has also set off a rush for new
The three IPOs on the Shenzhen stock exchange drew robust
demand, with subscription rates of between 120 and 218 times
over the number of shares on offer after the deals were priced
at relatively cheap valuations.
The rush for the shares also continued in the secondary
market with shares of waste disposal firm Wuxi Xuelang
Environmental Technology Co Ltd, meat processor
Shandong Longda Meat Foodstuff Co Ltd and
Feitian Technologies Co Ltd, a digital security
firm, all jumping by the maximum 44 percent.
Pensioner Xu Hongxiu, sitting in small brokerage office in
downtown Shanghai and eating rice porridge she brought from
home, said she had hoped to get a slice of the rally but was
unable to buy any of the new shares despite repeatedly bidding
"I came to this brokerage very early this morning to buy a
share of today's IPO companies. If I had been able to buy them,
of course I would make a lot of money," she said.
Retail investors like Xu are estimated to account for around
three-quarters of overall stock transactions on the country's
(Reporting by Shanghai Newsroom; Writing by Kazunori Takada;
Editing by Matt Driskill)