A Risky Game With `Red Chips'

Investors bid up stocks with Chinese government ties

In mid-March, Gitic Enterprises, a Guangdong-based construction materials and property company, put up for sale 100 million of its shares at 13 cents apiece, to be traded on the Hong Kong stock exchange starting Mar. 26. The offer touched off a storm. In a buying frenzy, investors oversubscribed the shares by 892 times. They borrowed so much to plunk down as deposits on their bids--a total of $13 billion--that they sent Hong Kong interbank interest rates soaring by nearly 1 1/2 percentage points. The buying spree added to the mix of euphoria and apprehension in the crown colony as the July 1 date of its reversion to China approaches.

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