Crazy oversubscription numbers

by Manshu on September 22, 2009

in IPO/NFO,World

At first I thought it was not reading it right, but I was: Sinopharm Group Company, which is China’s largest drug distributor company, recently came out with an IPO, and the issue got oversubscribed 570 times its Hong Kong part!

It attracted about 884 billion dollars (Hong Kong not Zimbabwe), and raised its maximum of HK 8.73 billion dollars. It just goes to show how hot this IPO market has become. In the past I have written about how this is shaping up like a bubble, and this promises to grow much bigger and bigger.

You will be sorry if you don’t find the greater fool, but until then, you can have your share of fun. I am quite amazed at the pent up retail demand that China has, and it goes to show that people there are dying for some action.

They are getting some action too. In July, the first Chinese IPO this year: Sichuan Expressway listed in China, and tripled in the first day of trading, and hit the circuit breakers twice in one day.

I have no means to participate in the China IPO market, but I wouldn’t touch it with a pole, even if I had the means. When others are greedy you should be fearful, and if an IPO is getting oversubscribed 570 times, you know what the investor mood is like. There are Chinese ETFs that I could invest in, but looking at all the IPO hype, I’d stay away from those too.

The way markets around the world have sharply run up makes me a bit uneasy too. The Indian markets are up about 100% in the last six months, American markets are up about 50%, and that’s just a bit too sharp for me.

What about you? What do you think about such extreme numbers? Do you think it is just a natural reaction or is there a devil in the detail that I am missing?

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