16 June 2019
Elderly care stocks have just received a boost from China's decision to bolster confidence in the consumer services industry. Photo: Xinhua
Elderly care stocks have just received a boost from China's decision to bolster confidence in the consumer services industry. Photo: Xinhua

A-share market waiting to exhale

Shanghai surged 1.39 percent last week, powering the combined transaction volume with Shenzhen above 1 trillion yuan (US$155.8 billion).

Investor sentiment is stable but there has been no breakthrough in the market.

If no stimulus policy is announced this week, the market is likely to amble along.

On Friday, the China Securities Regulatory Commission (CSRC) released a list of 10 companies allowed to resume their initial public offering (IPO) process.

Five will be listed in Shanghai and the others in Shenzhen, with three destined for its Small and Medium-size Enterprise board.

The regulator said a further 18 companies are expected to list before the year is out.

China recently changed its IPO subscription rules.

It no longer requires subscribers to prepay for the new shares, cutting the amount of money locked in during the subscription period.

With investors needing to pay only after they receive their share allocation, they might be tempted to subscribe for more.

The success rate will fall sharply.

During the first half, the success rate was just 0.3 percent.

The ultimate winner is mainland brokers regardless of whether they win the IPO lottery.

Mainland investors have an obsession with IPO in the belief that new shares can only bring profit.

Such sentiment can be easily manipulated.

Some CSRC officials have been sacked for involvement in IPO irregularities.

The government should review the procedures.

A total of 1,466 mainland-listed companies announced 2,915 mergers and acquisitions (M&A) deals in the second half, worth a combined 2.19 trillion yuan.

Most of these deals will lead to several days of speculative trading.

Real estate, media, telecom, pharmaceuticals and information technology have seen the most M&A activity.

Meanwhile, the State Council moved to boost confidence in the consumer services industry during the weekend.

Healthcare, elderly care, tourism, sports, cultural, legal, retail and wholesale, accommodation and catering, educational services were the biggest beneficiaries.

Speculation will be switching around these sectors.

I would recommend Jiangsu Phoenix Property Investment (600716.CN) and Shanghai Industrial Development (600748.CN) because they combine elderly care and real estate services.

Investors can consider buying at a good price.

This article appeared in the Hong Kong Economic Journal on Nov. 23.

Translation by Myssie You

[Chinese version中文版]

– Contact us at [email protected]


a columnist at the Hong Kong Economic Journal

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