By Fox Hu and Moxy Ying
You dont have to be a genius of late to make a killing in newly minted Hong Kong stocks. Just close your eyes and buy.
"I dont care about fundamentals,” said Hei Chiu, a 34-year-old merchandiser and individual investor who says he only purchases initial public offerings. "Share prices just go up if there is strong demand," he said.
His strategy of chasing the hottest deals has worked like magic. Of 63 Hong Kong new share sales in the last three months, the top one-third of the most oversubscribed saw an average first-day rally of 60 per cent, compared with a 27 per cent gain for all IPOs, according to data compiled by Bloomberg. You better sell fast, though: rallies often fizzle after the first few days.
Arrangers of the citys hottest deals have used famous consumer brands or celebrity links to lure investors. Among the successful ones are a bubble-tea franchise, a celebrity eye doctor and a producer of satirical media content.
Apart from tracking famous names, investors can look at margin loan data to gauge popularity. Brokerages such as Phillip Securities Group regularly update the amount of money investors borrow to bid for IPOs.
Bubble-tea maker B & S International Holdings added froth to the market in Hong Kongs second-hottest deal over the last 12 months. Retail investors jostled for a piece of the company this month, even though the retail business generates less than half of its revenue. Individuals ordered 2,601 times the shares originally set aside for them and B & S rewarded them by quadrupling on the first day of trading.
Most Kwai Chung, a provider of advertising and media services, surged as much as 880 per cent in its debut this week. Retail investors ordered 6,289 times the stock originally available to them, a record subscription ratio in Hong Kong. The producer of satirical media content rose to fame after naming itself as a play on the Chinese characters of Television Broadcasts, the citys biggest broadcaster.
C-Mer Eye Care Holdings, an eye-clinic operator whose founder is well known for catering to Hong Kongs rich and famous, surged as much as 586 per cent in the first three days. The retail portion of its IPO was more than 1,500 times subscribed in January.
The eye-popping rallies have a habit of sputtering soon after the first day. B & S has plunged 62 per cent from its intraday record high, while Most Kwai Chung has tumbled 70 per cent from Wednesdays peak. C-Mer has seen half of its peak value erased.
Ulferts International, a furniture dealer, has lost 66 per cent from its intraday record. The stock surged as much as 257 per cent on the first day, after orders covered more than 1,600 times the IPOs retail book.