Massive First Day IPO Gains Evoke ‘bubble’ Risk In Asian Markets

Massive gains posted by companies at their trading debut in regional stock markets in Asia this year are raising the spectre of a bubble, bankers and brokers said.

A record number of companies in Asia are seeing their valuations double after initial public offerings (IPO) this year, driven by red-hot demand from retail investors making the most of unprecedented market liquidity and lower interest rates.

The huge price pops have taken place across regional stock markets, including in Hong Kong, China, and India, prompting concerns that a “bubble” could be emerging.

Governments and central banks globally have unleashed unprecedented fiscal and monetary stimulus to support coronavirus-hit economies this year. But while many economies are still struggling with fresh lockdowns due to a resurgence in cases, the stimulus has helped fuel record activity in international capital markets.

In Hong Kong, the valuation of 11 firms doubled at their trading debut in 2020, while in mainland China 131 companies saw shares rise by at least 100% on listing day.

The hefty gains in China have been helped by the rules governing China’s STAR Market and Shenzhen’s ChiNext index, which removed the traditional caps on IPO trading limits for the first five days that exist on other mainland markets.