Crackdown Reins in Hong Kong’s Wild Small-Cap IPOs

Average first-day gains shrank to 23 percent from 605 percent thanks to new oversight

A crackdown by Hong Kong Exchanges & Clearing Ltd. and the Securities and Futures Commission has helped rein in extreme volatility and speculation in Hong Kong’s small-cap Growth Enterprise Market. The move comes after listings like that of Luen Wong Group Holdings Ltd., which rose 1,438 percent on its first day of trading and now trades at 31 Hong Kong cents a share, up just 19 percent from the IPO. Stocks debuting on GEM in the past 12 months gained an average of 23 percent on their first day, down from 605 percent for the year through January 2017, according to data compiled by Bloomberg.

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