Concerns deepen over troubled
Indian stock markets as the China's red-hot initial public offering (IPO) heats
up further. Foreign investors appear to be preparing to pull out their money
from Dalal Street and invest in lucrative IPOs in China.
As many as 20 Chinese companies
have lined up to issue IPOs this week amounting to $483.19 billion,
intensifying worries of outflows from other countries including India.
Impressive post-listing
performance of Chinese IPOs has created frenzy among the investor community. In
the past one year, all the IPOs have generated more than 40% returns on
listing.
"We have heard from
sell-side brokers that some of the selling in India is attributable to the fact
that Chinese markets have outperformed India," Nilesh Shah, MD, Kotak
Mutual Fund, told The Economic Times.
Recent controversy over Minimum
Alternate Tax (MAT) led to high volatility in domestic stock markets in recent
trading sessions, as overseas investors aggressively sold their shares.
Foreign investors have sold
shares amounting to over $2 billion or nearly ₹14,000
crore in the past 15 trading sessions, NDTV Profit said.
The Chinese securities regulator
has been fast accelerating its nod for IPOs in a bid to cool down its
skyrocketing stock market performance. Last Friday, the regulator approved a
batch of IPOs for the second time in less than a month.
"Regulators have said they
would accelerate IPO approvals and we're seeing it happen," Zhang Chen,
analyst at Shanghai-based Hongyi Investment, told Reuters.
The Chinese authorities have been
initiating many measures to curtail the speculative activity in its equity
markets. Despite a sharp decline in recent sessions, the Chinese stocks still
trade at multi-year highs, with a gain of 34% so far this year.
The China's Shanghai Composite
Index is up 122% since January 2014, supported by increased buying by the
retail investors.
Will China's IPOs Attract FIIs in
India?
Analysts see limited scope for
foreign investors, who have their holding in Indian equities, to participate in
the forthcoming $200 billion IPOs in China. The total share holdings of
overseas investors in India stand at over $300 billion, so offloading a part of
their holdings may offer a little liquidity to subscriber for Chinese IPOs.
There is no evidence of 'any
large-scale' selling of shares by foreign institutional investors (FIIs) so far
although the Chinese IPO boom has started a few months back. Recent sell-off in
Indian stock markets is largely due to uncertainty over retrospective tax and
weak corporate earnings, Business Standard reported.
Instead, China IPOs are having an
impact on its own markets, with the benchmark index declining by around 10% in
recent sessions. Investors are selling their shares to buy IPOs.
However, with the Chinese equity
market outperforming India's, many global money managers are reshuffling their
portfolios to include Chinese stocks.
Source: http://www.ibtimes.co.in/will-chinas-ipo-boom-weigh-troubled-indian-stock-markets-632032
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