China Goes Berserk for IPO's…Sound Familiar?


Where have we seen something like this before?

Ahhh, the year 1999…Y2k was on everyone’s mind, all the boys had their hair pushed forward and up, and our eardrums were pounded mercilessly by that Rob Thomas/ Carlos Santana abomination that attacked from every radio speaker coast-to-coast.

More memorable to me than any of that was the dot com frenzy that turned the entire country into a teeming mass of tech stock speculators.  As the NASDAQ worked it’s way up to 5000, each day we were treated to stories about the guy who takes the garbage out at a tech company driving a Ferrari, or the NYC cab driver who makes million dollar trades while stopped at red lights. 

We also had the pleasure of watching hundreds of ETrade and Ameritrade commercials featuring investing tips from Anna Kournikova as well as the likes of Jackie Chan kicking his laptop in mid-air to make a trade.

When I read the article in The Times about the fact that the Chinese have gone wild for IPO’s, I couldn’t help but think back to our own unrequited love affair with mass stock speculation…

From The Times Online:
Spectacular gains for Shanghai stocks and a blazing resumption of initial public offerings have enticed nearly half a million novice Chinese investors to open trading accounts in less than a week.  

With the leading Shanghai indexes nearly 90 per cent higher than they were in January, the appetite for risk has returned and the race to join the investment fray has intensified. Your-Mart, a retailer, which listed on Shenzhen exchange last week, soared by over 90 per cent in its first day of trading, while two other offerings – a drugs and a cable company – were more than 500 times oversubscribed.

Well, shall we let China’s middle class in on how this ends?  I believe we’ve all seen this movie before, about ten years ago.  It certainly didn’t have a satisfying conclusion for those who didn’t leave the theater in time or who bought their “tickets” on margin.

At least a dozen IPOs are immediately planned in what brokers in Hong Kong expect to be a release of pent-up demand. Companies expected to float include at least two securities groups, a road-building company, a brewery and several engineering groups.

Here’s how this works…bankers will use the earlier, successful deals as examples to entice everyone into the game.  The deal quality will inevitably decline until the point when they start taking every rickshaw-puller and dumpling maker in Shanghai public.

Then, look out below.

The trouble is, it’s tough to tell how much longer this can go on for in the meantime.


Novice Chinese Traders Dash to Market (Times Online)

Tags: , , , ,

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. immediate edge review commented on Sep 29

    … [Trackback]

    […] Find More to that Topic: […]

  2. fun88 commented on Oct 29

    … [Trackback]

    […] Find More on that Topic: […]

  3. fake watches commented on Dec 17

    … [Trackback]

    […] Read More Info here on that Topic: […]

  4. rolex podróbka commented on Jan 20

    … [Trackback]

    […] Read More Info here to that Topic: […]