The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
Bloomberg
The world’s most volatile new stocks are vanishing from Hong Kong after regulators tightened oversight of the city’s small-cap Growth Enterprise Market.
Stocks debuting on GEM in the past 12 months rose an average 23 percent on their first day of trading, down from an eye-popping 605 percent for the year through January 2017, according to data compiled by Bloomberg. The performance in the recent period is more in line with the main exchange’s first-day gain of 18 percent.
A crackdown by Hong Kong Exchanges & Clearing Ltd. and the Securities and Futures Commission helped rein in extreme volatility and speculation in Hong Kong’s small-caps, said Daniel So, a strategist at CMB International Securities Ltd. Three GEM stocks surged more than 20-fold on their debuts in the year through January 2017, before authorities tightened listing requirements and probed how new shares were allocated, among other efforts. Amid the push, several initial public offering applicants shelved their plans.
“The risk of investors getting burned in violent ups and downs has been contained,†said So.
GEM-listed Luen Wong Group Holdings Ltd. was one of the world’s best-performing debuts in 2016, rising 1,438 percent on its first day of trading and ending the year up 8,515 percent from its listing price. The civil-engineering contractor now trades at 31 Hong Kong cents a share, up just 19 percent from the IPO.
The S&P/Hong Kong GEM Index has declined 2.2 percent this year, while the main exchange’s Hang Seng Index has climbed 9.7 percent.
GME Group Holdings Ltd., a subcontractor of tunnel excavation that soared 543 percent on its February 22 debut in 2017 and was halted, became the subject of a regulatory investigation.