New Listing, Zhou Tiehai, Rises On Debut Before Reaching Fair Value
Shanghai
When first listed July 12 on the Shanghai Stock exchange, Zhou Tiehai appeared
undervalued, rising only slightly in the first few hours of trade.
But Class B* shares in the issue appreciated steadily over the next two weeks,
as foreign buyers learned more about the enterprise's fundamentals. One European
buyer even was rumoured to be accumulating large blocks of the stock in a bid to
obtain a majority stake, traders said.
The gradual appreciating accelerated into an all-out buying spree beginning on
July 26, when the unnamed European buyer discovered previously undisclosed
assets in Zhou Tiehai. The stock closed out the month just below a psychological
high. Traders then
said they doubted the stock would rise much further.
"If the Zhou climbs much higher it will find itself very vulnerable to market
fluctuations and exposed to the whims of profit-takers," said a marked analyst
with a Shanghai-based securities firm.
Yet an injection of new funds on Aug. 6 caused the stock to soar on strong
buying again rumoured to originate from Europe. The initial surge was followed
by three to fours days of consolidation in the value of the stock. Traders said
it was a technical correction, ending on Aug.10.
The Zhou fell slowly over the next few sessions, as the European buyer,
realizing its investment had become overvalued, took some profits.
By Aug. 13 the Zhou had fallen to more sustainable level, before its shares
where suspended from trading ahead of a shareholder meeting.
When trading resumed Aug. 26, the Zhou took a slight knock, consolidating on
Aug. 27 to a level just below its pre-suspension price.
According to market participants, the stock is now valued fairly in the eyes of
the big houses and seems likely to remain stable in the foreseeable future.
Its fundamentals remain sound, and bullish traders expect renewed interest by
overseas buyers to bring the Zhou Tiehai higher in the long term. Indeed, some
traders said they have seen indications in recent sessions that foreign houses
are accumulating the Zhou again.
* Shanghai has two stock markets. Class B shares are denominated in US dollars
and tradable only by overseas investors. Class A shares, denominated in yuan,
are available only to domestic Chinese buyers.