Ching Lee Plunges 91% as Hong Kong’s Small-Cap Volatility Soarsby
Stock jumped 700% on its trading debut five months ago
GEM board IPOs this year have fallen average 59% from highs
A Hong Kong building contractor plunged 91 percent to become another victim of turbulence on the city’s small-cap enterprise market.
Ching Lee Holdings Ltd. shares slumped to 45 H.K. cents at the close on record volume, wiping out $564 million of value. The company reached a high of HK$5.86 on July 13 after surging about 700 percent on its March 29 debut. An employee at Ching Lee said company officials could not immediately respond to questions.
Gut-wrenching volatility of newly-listed stocks on the Growth Enterprise Market comes as regulators seek greater powers to scrutinize IPO applications in the city. The 25 companies that started trading this year on Hong Kong’s smaller exchange have fallen on average 59 percent from their highs, data compiled by Bloomberg show.
"The overall quality of GEM companies don’t merit the attention of serious value investors,” said Ronald Wan, chief executive at Partners Capital International Ltd. in Hong Kong. “We may need to improve our market rules by requiring public offerings, rather than just placements, for GEM listings. We may also raise the minimum number of shareholders for GEM listings."
MediNet Group Ltd., which soared 448 percent on its May 31 debut, has slumped 95 percent from the high of that day. Royal Catering Group Holdings Co. has also lost 95 percent from the peak of its first day of trading on Aug. 8.
The SFC is working with the city’s exchange operator on a consultation that would change how one of the world’s largest IPO venues screens applicants. The proposals published in June would reduce the power of the exchange-appointed Listing Committee and give the SFC more control, according to lawmakers and brokers.