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HONG KONG: There are signs in Hong Kong that appetite for initial public offerings (IPOs) might be returning.
Chinese herbal shampoo maker Bawang International made a head-turning debut on Friday when its counter closed 27 per cent higher than its IPO price, attracting more than US$9.4 billion worth of orders from retail investors and institutions.
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.
Of late, new IPOs were down by more than 70 per cent compared to last year. 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.
Firstly, it is quite a visible brand in Hong Kong with action star Jackie Chan and pop singer Faye Wong endorsing its products. Secondly, sales of its products are deemed to be more resilient than others during the economic downturn.
Still, some analysts are not convinced about longer term prospects.
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.
- CNA/si
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