Disappearing IPO gains cause concern on Hong Kong bourse

HONG KONG (Dec 20): Hong Kong’s Growth Enterprise Market has seen a string of the world’s best stock debuts this year. It’s also been home to some of the biggest plunges, wiping out gains and raising questions about how the exchange operates.

Vegetable supplier Goal Forward Holdings Ltd., whose shares jumped 1,500% on their October debut, is trading 20% below its offer price. Cmon Ltd., designer of board games including “Zombicide: Black Plague,” gained 1,330% on its first trading day on Dec. 2 and then fell for six consecutive sessions to below its offering price. It’s a pattern that plays out regularly on the city’s exchange for small companies.

Concentrated holdings, preferred investors during initial public offerings and low trading volumes all contribute to the roller-coaster performances, which have caught the attention of the city’s chief regulator. Ashley Alder, head of the Securities and Futures Commission, said last month he wants his agency to look at the issues on GEM. The scrutiny comes as mainland investors start to trade the city’s small-cap shares through the stock-trading link with Shenzhen that opened on Dec. 5.

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