Is that a mental hospital in the IPO queue?

May 13, 2015 15:29
Wenzhou Kangning Mental Healing Hospital is among those trying to cash in on the current fervor among investors for Chinese listings. Photos:, HKEJ

With the stock market rally making many Chinese go bonkers, it is perhaps fitting that a mental hospital is among those lining up to raise funds from investors.

According to media reports, Wenzhou Kangning Mental Healing Hospital is looking to raise between US$100 million and US$200 million within this year in a Hong Kong IPO.

The hospital claims on its website that a 700-member staff will serve hundreds of patients suffering from mental health and related problems, as well as offer healing and rejuvenation programs.

The listing candidate will definitely add a new element to the Hong Kong market.

As of now, there are many pharmaceutical companies listed in the city, but none of them run a hospital.

This could lead to Kangning Mental Hospital getting a higher valuation as investors chase a new mainland speculative bet.

The listing will come amid a bull run not seen in eight years, which has fired up recent entrants to the market.

Jicheng Umbrella has seen its shares rise more than ten-fold within two months of its listing, while printed circuit board manufacturer Yan Tat Group set a record with a much crazier performance.

Last Friday, Yan Tat shares soared to as much as HK$102 after opening at around HK$30, before falling equally dramatically and ending the day at HK$17.44. 

Yan Tat Group listed in early December last year after pricing its IPO shares at HK$1.23.

The huge volatility in the stock, which would make any market maker break out into cold sweat, has caught the attention of the Securities & Futures Commission.

The crazy movements on the local bourse come as mainland investors find it more fun to punt on Hong Kong-traded stocks.

That is because stocks here do not have daily trading limits like the A-shares on the mainland. So in theory, one can push stocks to any level and play pump-and-dump games.

Hong Kong's IPO market has shown that it can cater to a wide variety of companies.

All that a listing hopeful needs to do to draw interest is to convince investors that they have a chance to make a quick buck.

Looking at the IPO pipeline as of now, one can find interesting Chinese names such as Guangxi Golden Throat Group (which sells sore-throat candy) and Gudou Hot Spring.

There is also a cross-border exchange shop Hui's Brothers Foreign Exchange Co. (which runs 29 currency exchange stores in Hong Kong) and a local food chain which holds the BLT Burger franchise.

All these come on top of the ginseng, animation and pachinko companies that successfully listed in Hong Kong in the past year.

Next in line may be AC Milan, whose owner Silvio Berlusconi -- yes, the former Italian Prime Minister -- is said to be talking to Chinese investors who may want to capture Hong Kong's first potential football club listing.

Now, one may be amazed at how welcoming the Hong Kong IPO market has become, but it is also a clear sign of an overheated market.

Caveat emptor! You have been warned.

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EJ Insight writer