IPO Froth In Asia

Not since the internet bubble have we seen oversubscription for IPOs like these. One of the touted genuine internet China plays, Alibaba.com, has locked up about HK$450 billion, closing its retail book on Friday with the tranche 250 times oversubscribed. Its international allotment has attracted US$180 billion (HK$1.4 trillion) worth of orders. Sources said the IPO shares will be set at HK$13.50 apiece - the top end of the indicative range. Market watchers believe the shares will jump 50 percent above the offer price on their trading debut next month. Alibaba.com is more than just a flimsy internet play, we are not talking about 2000 anyway. The company has proven itself as an adequate player in the biggest potential internet market - thus explaining the enthusiastic response from international fund managers.

During the dotcom frenzy in 2000, Tom.com, owned by Cheung Kong was 669 times oversubscribed and locked up HK$51 billion. The stock closed at HK$7.75 on debut, or 3.35 times the HK$1.78 offer price, resulting in investors gaining about HK$12,200 from a board lot of 2,000 shares. Tom.com, now traded as Tom Group, closed last Friday at HK$0.73. Another moverick during the internet boom time was Sunevision owned by Sun Hung Kai Properties, was 217 times oversubscribed and locked up HK$70 billion. It closed at HK$17.35 on debut, 45 percent above its HK$10.38 offer price. Sunevision closed at HK$1.16 last Friday.

What about the Petrochina juggernaut? Well, PetroChina attracted about 3.3 trillion yuan (US$440 billion) in subscriptions to its Shanghai IPO, a record for a domestic stock offer. It is offering up to 4 billion A shares to raise as much as US$8.92 billion in the offer, which is expected to be the world's biggest IPO so far this year. Well thats an over-subscription rate of 49x. The drain of funds to the huge offer sent short-term Chinese money market rates soaring to multi-year highs this week and pushed down the stock market. Liquidity in the markets is expected to improve dramatically on Tuesday and Wednesday, when funds frozen by the IPO are returned to unsuccessful applicants.