Stock prices hit limit as IPO 'fever' heats up

The rush for new offerings pushed up share prices on Tuesday, even as exchange officials warned of the risks of "blind" speculation in initial public offerings.

Seven of the eight companies that made their debuts in Shenzhen on Tuesday were suspended from trading after their shares surged 45 percent from the IPO prices, exceeding the exchange's periodic limit for first-day trading.

Trading in these issues was initially halted for an hour, starting at 9:30 am, as prices surged by the 20 percent limit during an auction period that ran from 9:15 am to 9:25 am.

Truking Technology Ltd, a Hunan-based company focused on the pharmaceutical and food packaging machinery industry, closed 45.2 percent higher at 58.08 yuan ($9.60).

The People's Bank of China said on its micro blog that it had provided liquidity to large commercial banks via the short-term lending facility.

It also said it was managing liquidity via a reverse repurchase operation on Tuesday to stabilize interbank liquidity conditions ahead of Lunar Chinese New Year. That holiday begins on Jan 31.

"Recent reports about potential trust defaults and the fact that the Shanghai stock market index dropped below 2,000 on Monday suggest market confidence is weak, which may have put pressure on the government to take action and restore confidence," Zhang Zhiwei, Nomura's chief China economist, wrote in a note on Tuesday.

The PBOC's announcement and the strong performance of new shares helped lift the benchmark Shanghai Composite Index by 0.86 percent to 2,008.31 points on Tuesday. Volume increased to 52 billion yuan from 48.3 billion yuan on Monday.

However, the authorities remain cautious about the response to IPOs, and they're trying to dissuade retail investors from "blindly" following fads.

"China's securities market has not established a culture of rational investment. Some small investors are experiencing big losses due to blindly buying at high prices during IPOs," the Shenzhen Stock Exchange said in an announcement on its website on Tuesday.

SSE and its Shanghai counterpart are said to have identified some 300 and 200 key accounts, respectively, to monitor in an effort to curb overpricing and market manipulation.

xieyu@chinadaily.com.cn