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Hong Kong retail investors chasing after IPOs
Friday, 26 June 2009
South China Morning Post article yesterday (June 25).
Bawang shampoo is popular in China, and is available at NTUC Fairprice.
THERE ARE a couple of interesting things about this South China Morning Post article yesterday (June 25), chief of which is the news of a dash by Hong Kong retail investors for IPOs.
That’s a sharp contrast to the still cautious sentiment in Singapore to the equities market - and there are no big IPOs on the Singapore horizon.
The Hong Kong IPO that investors are plonking down big money for is that of Bawang International Holding, a China shampoo retailer whose products come with awful-looking packaging, in my view. Incidentally, they are available at NTUC Fairprice in Singapore too.
The IPO has drawn more than HK$16 billion worth of subscription money from local investors, according to the newspaper article.
That hair-raising amount equaled about 100 times the shares available for retail investors.
Bawang is offering 700 million new shares at HK$1.95 to HK$2.38 each, representing 17.1 to 20.8 times its earnings last year.
Fascinating – the PE ratio is not some measly 3-5 X that IPOs may be sold at in Singapore.
And unlike in Singapore, the retail orders for Bawang shares were backed by a large pool of margin financing.
“We have received margin financing applications for HK$1 billion to buy Bawang’s IPO in the first 15 minutes after the offer opened, and the eventual amount totaled HK$3 billion,” said Nelson Chan, general manager of Bright Smart Securities.
Spurring the use of margin finanacing is the drop in interest cost to 1.5-3%, compared to 6-7% in 2007, for IPO applications.
Bawang shares will debut on the HK mainboard on July 3.
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