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Monday, 8 November 2010

Investors hum to frenzied beat of the IPO gold rush

Brokerages report rise in opening of new accounts as new listings bring buzz back to market


(SINGAPORE) The ground floor of brokerages across the CBD have been livelier than usual, as walk-in clients clamour to part with their money, keen for a piece of the initial public offering (IPO) gold rush. But already, it is evident that some prospectors will do better than others.

With blockbuster offerings from Mapletree Industrial Trust and Global Logistics Properties (GLP) making splashy starts this month, remisiers have seen a surge in new account openings by novice investors.

'I've had 10 new accounts opened in a two- week period. For the majority of them, it was because of the IPOs,' said Shane Ng, a remisier with Kim Eng Securities.

CIMB Securities has also seen a jump in the opening of new trading accounts. 'For the months of September and October, clearly things have picked up a fair bit,' said Malcolm Koo, head of sales at CIMB Securities.

'As a whole, on a year-on-year basis, we are seeing growth in terms of new accounts being opened. It has been a good double-digit growth for us every month,' he added.

While most of them tend be new believers in the gospel of stockmarket recovery, others are born-again investors who have gained renewed faith in stocks.

'We have seen reborn investors who have not been trading for decades coming back because of the IPOs, and we've got enquiries that have been a lot more frequent since September,' said Albert Fong, a remisier at OCBC Securities.

'They are investing also because the interest rate offered by banks is almost zero,' he added.

Over at Phillip Securities, the revival has been resounding. 'I've seen 50 accounts being reactivated over the last one or two weeks,' said Henry Tjoa, a remisier there.

On the whole, the numbers have appeared compelling as well. Since June, total monthly turnover on the Singapore Exchange (SGX) has risen rapidly, from a volume of 22.6 billion shares in June to 45.4 billion shares in September.

While the numbers for October are not out yet, they are bound to be higher than September's. The greater mystery, however, is whether the players that stampeded into the market in October will still be there by year-end.

Already, brand-new accounts have seen little action beyond the flurry of IPO-flipping, which usually happens within three days of a successful application. 'Most of them are fresh graduates with not a lot of money to invest anyway,' said Kim Eng's Mr Ng.

In a market that had been starved of IPO action for the first part of the year, some brokers and investors have begun opting for a scattershot approach, now that offerings are abundant. 'I just tell them to apply - doesn't matter what stock. I mean, GLP? Who really understands logistics? I don't even read the financial statements,' one remisier said.

Another remisier with two decades of experience has his reservations about the IPO euphoria. 'They like the government-brand stocks like GLP. Whether or not it's a good choice remains to be seen,' he said.

In what could cast doubt on the underlying fundamentals of the market, some of the smaller issues have already been priced below their offer price, as investors do a hit-and-run with IPO applications.

XinRen, which was 4.3 times oversubscribed earlier this month and had a euphoric adjective placed right before 'debut' to describe its first day of trading, saw its share price drop to 53 cents the day after - below its offer price of 55 cents.

Oxley Holdings, which listed last week, did not even have a debut worth writing home about because it felt the fickleness of the punters before its first trading day closed, leaving it 1.5 cents below its 38-cent share price.

And poor Anchun International Holdings, which listed last Monday with an offer price of 28 cents, ended the week at 23.5 cents.

Some remisiers, however, believe that the good times for the market are here to at least visit for a while. 'The market will still perform for the next 3-6 months. It's not at a frenzied point yet,' said Phillip Securities' Mr Tjoa.

Others think that, good times or not, it is the turbulence that will separate investors from punters.

'On a long-term basis, it will be on an uptrend but in between, there'll be some pullback here and there,' said OCBC's Mr Fong. 'The fear used to be prevalent among the small-time investors but the confidence is coming back. I just hope they don't get carried away.'

Createwealth8888 welcome the newbies and re-born retail investors back to the stock market; but they did to remember this:

 "The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder.

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