21 January 2020
China Literature, a Tencent unit that is involved in online publishing, has sought a very high valuation, but the IPO is still expected to be a big hit. Photo: AFP
China Literature, a Tencent unit that is involved in online publishing, has sought a very high valuation, but the IPO is still expected to be a big hit. Photo: AFP

Why investors smell money in November

Who would have predicted that a year with number “7″ at the end would turn out to be so lucky for investors, given the stock crashes we saw in 1987 and 1997 and the seeds of a disaster in 2007 before the meltdown in 2008?

After the big rally in the past few months, one can only speculate as to where the Hong Kong market will find itself at the end of December and if stands the risk of following the pattern seen 10 years ago.

Anyway, let’s enjoy the party while it lasts and focus, for the moment, on what lies in store in November.

Investors have ample reason for excitement as the upcoming month, especially the first two weeks, will offer several money-making opportunities, particularly in the technology segment.

First, there will the market debut of China Literature (0772), China’s biggest online publisher and a Tencent spin-off.

As the company opens the retail book tomorrow for its US$1.1 billion IPO, ahead of a planned November 8 listing, several finance firms have been offering margin financing plans to customers, riding on expectations that the deal will prove even hotter than Zhong An Online Property & Casualty Insurance which raised US$1.5 billion last month.

Unless there is a global stock crash to halt a 10-month stock rally, it is widely expected that China Literature could freeze over HK$200 billion in capital and become the hottest IPO this year. The stock was priced in a range that makes for an expensive but auspicious HK$11,111 for a minimum lot.

In the bull market, pigs fly. Zhong An, founded by the three Ma tycoons (Alibaba’s Jack Ma, Tencent’s Pony Ma and Ping An Insurance’s Ma Mingzhe) was once up 50 percent in its first week of trading despite the fact that the firm is still far from making its first dollar of profit.

Coming to China Literature, it has at least made some money. The price-earnings ratio is expected to top 100, making the scrip very costly, but it is still anticipated to be a big draw for investors because of the good track record of Tencent, which has been steering the blue-chip index for at least three years.

The e-book provider decided not to invite cornerstone investors, a rare move for a large IPO but investors see that as proof that Tencent is very confident about the market reception for the unit.

In mainland China, a China Literature rival, IReader Technology, has seen its A-shares surge for 18 trading days and rise seven-fold within this month in anticipation of the hot Hong Kong debut of the Tencent unit.

Following China Literature into the market would be Razor, an e-sport game maker backed by tycoon Li Ka-shing and US-based tech giant Intel Corp., which hopes to raise US$600 million. The unique nature of the company and the blessing of Hong Kong’s richest man are expected to make it another hot new listing.

On a slightly different track, let’s not forget the iPhone X, which also promises to be a bonanza for those seeking to make a quick buck in the grey market.

Apple will start accepting pre-orders for the new device later this week, with deliveries to begin next month.

Though the handset was priced at near HK$10,000, making it the costliest iPhone ever, punters believe they can flip it for almost double the price.

This is largely because of the gadget’s special facial recognition feature and expected global short supply of the new product.

So, you have two hot listings and a new Apple offering to look forward to. Get either one of those and you could be in luck during the thanksgiving month. All the best!

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EJ Insight writer