Recently, the A-share market has frequently seen new shares break. From April 18th to 22nd, a total of 15 new stocks were listed, of which 6 broke on the first day, and the break rate on the first day was as high as 40%.
Industry insiders believe that the main reasons for the recent breakout of new shares are the overall downturn in the secondary market and the inability of some quotation agencies to adapt to the new inquiry regulations and fail to adjust their quotation strategies in a timely manner. China Securities Journal, China Securities Taurus reporter learned that the phenomenon of new shares breaking has also attracted the attention of the regulatory agencies. Next, the Shanghai Stock Exchange will consider including indicators such as a large proportion of breaking shares into the evaluation of the quality of practice of lead underwriters.
Some buyer institutions offer unreasonable prices
Up to now, there are 114 newly listed A-share stocks this year, 32 of which broke on the first day, and the first-day break rate was 28.07%.
In this regard, market institutions generally believe that the main reason for the recent breakout of new shares is the overall decline in the secondary market. At the same time, some quotation institutions lack expectations and adjustments to the changes in the secondary market, and fail to adjust their quotation strategies in a timely manner.
Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said at the Boao Forum for Asia 2022 annual meeting on April 21: “Recently, the market has discussed IPOs falling below the issue price. Recognition, the pricing power should be further improved.”
The person in charge of a fund company in Beijing believes that the break is a manifestation of the spontaneous adjustment of buyers and sellers in mature markets. The break-out rate of new shares in US and Hong Kong stocks is about 30%. Recently, the break-out rate of Hong Kong stock market was as high as 80%. Some new shares have been cancelled or suspended. Regarding the reasons for the recent high break, the person in charge of the above-mentioned fund company believes that the right to speak between buyers and sellers after the new price inquiry is more “equivalent” than before, but institutions need to adapt to this change completely. Market changes lack reasonable expectations and adjustments, and they are still “wearing new shoes and walking the old road”, and the quotation is unreasonable.
The person in charge of a fund company in Shenzhen also agrees with the above point of view: some buy-side institutions have not changed their strategies, and they mainly refer to the previous higher new yield quotations when inquiring. The recent overall downturn in the secondary market and the correction in the valuation of electronics and biomedicine have directly affected the stock price trend after the listing of this batch of new shares, resulting in a breakout. The person in charge also pointed out that some issuers themselves had too high expectations and lacked rational cognition. The current PreIPO market is frothy, the private equity market and the secondary market are seriously upside down, and valuations will eventually return in the secondary market.
The number of abandoned purchases exceeding 100 million yuan increased
New stocks have frequently broken, and some investors have been “retreat”. Recently, there have been more cases of online abandonment of more than 100 million yuan. However, “abandoning it” is not the best strategy, and some stocks abandoned by investors have performed well in the secondary market.
For example, there are two star stocks in the IPO market this week, one is Nanochip, which has the highest issue price this year, and the other is CNOOC, which has the largest issue this year. Both IPOs suffered massive abandonment by online investors during the issuance stage, but they performed well after the listing. According to the latest closing price, CNOOC can earn 4,370 yuan in the first sign, and 14,800 yuan in the first sign in Xinwei. Before that, CNOOC had abandoned about 243 million yuan of purchases, and the abandoned purchase amount of Naxinwei reached 778 million yuan.
Looking at the overall science and technology innovation board, the data shows that since the beginning of this year, the median increase of new stocks on the science and technology innovation board on the first day is 28%, and the median decline is -18%. In addition, some data show that even if there are more breaks on the first day, most of the new stocks that break the issue have a limited decline, and most of the new stocks have rebounded after the first day of the break issue, and a few have returned to above the issue price.
“A certain degree of new stock breakout shows that market adjustment is effective and has a positive effect. First, it helps the buyer to clear the new speculative products of the ‘bo finalist’ strategy, leaving institutions with prudent quotations. Second, it is conducive to the seller’s prudent pricing , the underwriting pressure has increased, and the market restraint effect has appeared.” said a person from a large fund company.
Industry insiders believe that whether it is new stock pricing or subscription, it is no longer a “brainless” investment. Some trading institutions still retain the previous inertial thinking, have not yet adapted to the new regulations, do not pay attention to investment research work, and lack the ability to distinguish and predict the fluctuations in the secondary market, the adjustment of industry and company fundamentals; for some investors, ” “Invincible new shares” has been deeply rooted in the hearts of the people, but the concept and investment habits of value investing have not yet been established, and they lack the ability to judge the pricing of new shares. Investors should strengthen their study of the relevant rules for the subscription of new shares, and have a full understanding of listed companies before launching new shares.
Breaking phenomenon attracts regulatory attention
China Securities Journal, China Securities Taurus reporter learned from many sources that the phenomenon of new shares breaking has also attracted the attention of regulators. Recently, the Shanghai Stock Exchange organized a number of securities companies to hold a symposium to discuss the current market breakout phenomenon. The brokerages participating in the meeting pointed out that the increase in the breakage rate is a “re-education” and “required course” for the market’s perception of all parties, and supervision should be maintained, and the existing inquiry and pricing mechanism does not need to be significantly adjusted. “Temporary changes in the rules will affect the market. The pricing strategy, driven by risk aversion, the convergence of institutions will lead to another outcome, such as ‘grouping’.”
Regarding how to strengthen the underwriting of new shares and reduce the risk of breakage and abandonment of purchases, the heads of many securities companies have promised that they will first further standardize the requirements for writing bid reports, make prudent valuation assumptions, and objectively reflect the reasonable value of the company in the valuation conclusion. Secondly, when pricing, the quotations of long-term investors such as leading insurance companies and public funds are used as the main reference to determine the issue price reasonably and prudently. At the same time, we will do a good job in the management of issuers and shareholders’ expectations, timely communicate the recent market conditions, do a good job in issuer education, guide issuers to raise funds reasonably, and carefully choose the issuance time window. Finally, strengthen roadshow communication, convey the reasonable investment value of enterprises, fully do a good job in revealing market risks, require offline investors to follow compliance quotation requirements, and remind online investors to abandon compliance risks.
The Shanghai Stock Exchange emphasized at the meeting that all lead underwriters should prudently write investment value reports in accordance with the requirements of the association, fully carry out investor roadshow communication, remind market risk perceptions, manage issuers’ valuation and pricing expectations, and rationally plan fundraising and investment projects. After fully considering market, industry and underwriting risks, the issue price is prudently determined. In the next step, the Shanghai Stock Exchange will consider including indicators such as a large percentage of breakouts into the evaluation of the quality of practice of lead underwriters.Return to Sohu, see more
Editor:
Disclaimer: The opinions of this article only represent the author himself, Sohu is an information publishing platform, and Sohu only provides information storage space services.