Friday, January 26, 2007


Salivating over the "easy" profits to be made in the frothy Chinese equity markets, Macquarie's is launching a new fund which will liquidate hot new stocks within months of their purchase and reinvest the proceeds in yet more IPOs by Chinese companies in Hong Kong, Singapore, the US and anywhere else. I'm sceptical about the success of this. In my old life as an Asian stockbroker, we were always told by the corporate finance guys that "flippers" ie people who buy on the first day of a new issue and sell soon afterwards, would be last on an allocation list. The reason for this was that the company issuing the stock would always generate more profit to the investment bank than commission from a client so the bank wanted long-term investors, a stable share price and the opportunity to issue more shares or bonds in the future. Therefore, in very hot issues, Macquarie's should be towards the bottom of the allocation list, whereas they'll be given all the shares they want in unpopular IPOs.


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