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SHANGHAI/SINGAPORE :Some shares among the first batch of stocks to list under China’s registration-based initial public offering (IPO) system more than tripled in their debut on Monday despite tepidness in the broader market.
The listing of the 10 companies on the main boards in Shanghai and Shenzhen marks the full roll-out of China’s new U.S.-style IPO mechanism, designed to make public share sales more market oriented.
The system has already been adopted by Shanghai’s tech-focused STAR Market, Shenzhen’s start-up board ChiNext and the Beijing Stock Exchange for smaller companies.
Shenzhen CECport Technologies Co, an electronic components distributor based in the southern technology hub of Shenzhen, opened up 161 per cent on Monday, and surged by as much as 239 per cent, after it raised 2.25 billion yuan ($327.18 million).
Under the new rules, there is no daily trading limit for the first five trading days for shares that have listed after an IPO. Previously, new stocks listed on China’s main boards could jump as much as 44 per cent and slump no more than 36 per cent in their debut.
However, after those five days, stocks listed on the main boards will be subject to the regular 10 per cent daily trading limit.
Dencare Chongqing Oral Care Co, an oral products maker, opened up 98 per cent and soared by as much as 214 per cent. The other eight companies, including Shaanxi Energy Investment Co and Both Engineering Technology Co, rose by between 50 per cent and 120 per cent.
Ade Chen, the general manager of asset manager Fund Investment in Guangzhou, said the stocks surged as “their valuation and debut prices are not expensive”.
CECport Technologies’s IPO was priced at 26.8 times its earnings, below the industry-wide valuation in 2021 of 35 times earnings, according to its prospectus.
Dencare’s price-to-earnings ratio for the IPO was 36.8, versus a wider industry valuation of 51.6 in 2021, its prospectus said.
Both figures indicate the companies are undervalued relative to their peers.
“Afterwards, investors will focus more on companies’ growth potential and fundamentals,” Chen said.
Overall, China’s stock benchmark index, slipped roughly 0.3 per cent on Monday, as investors focused on China’s drills around the Taiwan Strait and awaited more data to gauge the strength of China’s economic recovery after it dropped restrictive COVID-19 policies.
The market-oriented IPO system reform is expected to speed up listings and corporate fundraising, as Beijing seeks to revive an economy ravaged by COVID restrictions.
“The changes brought about by the IPO reform are all-round and fundamental, centred by information disclosure,” Yi Huiman, the chairman of the China Securities Regulatory Commission (CSRC) said, according to a report from state media CCTV on Monday.
“The service function of the capital market to the real economy, especially technological innovation, has been greatly improved,” Yi said.
($1 = 6.8769 yuan)
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