From The Economist:
By normal standards, investors in Chinese shares ought to be ecstatic. Over the past 12 months prices on the Hong Kong , Shanghai and Shenzhen stock exchanges have leapt by 45%, 83% and 132% respectively. This remarkable performance has been propelled by a convoy of new offerings — some genuine stockmarket debuts, others selling mainland investors the shares of companies already listed elsewhere. In 2007 about $90 billion will be raised from these initial public offerings (IPOs) in China, almost as much as in New York and London combined. A vast pool of liquidity has been created even as the rest of the world has become parched. Yet the mood is darkening.
Of the 15 largest offerings to have debuted on the mainland exchanges this year, the share prices of eight are below their first-day close. The most vivid example of the market’s gloom was once the most vivid example of its elation. PetroChina , an energy producer, became the most valuable company in the world when its shares more than doubled on its November 5th debut in Shanghai. Since then, its shares have dropped in value by a third and PetroChina has become shorthand for a sucker’s trade among angry Chinese punters. More recently, Sinotruk and Sinotrans Shipping also fell below their opening prices on the day of listing, shocking retail investors who had fought for shares in the certain knowledge that every offering could only go up. [Full Text]
