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28-01-2011, 05:59 AM
A good example for not chasing prices without looking at fundamentals!
Jan 28, 2011
China Gaoxian hit by poor showing in Seoul
By Jonathan Kwok
SHAREHOLDERS had bet that China Gaoxian's dual listing in Korea, which kicked off on Tuesday, would be a hit - and a boon to the company's shares listed on the Singapore Exchange (SGX) as well.
But the opposite has happened.
The counter here has tanked, after a particularly poor early showing by the textile company's Korean Depository Receipts (KDRs) in Seoul.
Since late December, investors here had chased the SGX counter to an all-time high of 45 cents on Jan10, on hopes of a good start in South Korea. However, all those gains have been erased.
SGX firms to have done well of late with dual listings abroad include Yangzijiang Shipbuilding and Super Group.
'People were looking at the likes of the successful Hong Kong and Taiwan listings, and they were extrapolating the potential rises into Gaoxian's KDR,' said Sias Research vice-president Roger Tan. 'But investors have spoken, and it has not done well.'
Since Tuesday, China Gaoxian's KDRs - the first to be launched by a Singapore-listed firm - have fallen 26per cent from their initial offering price of 7,000 won (S$7.70) to close yesterday at 5,150 won.
The SGX counter has also fallen sharply. The shares stabilised yesterday to end flat at 32 cents - still 27per cent, or 12 cents, below Monday's 44 cent close.
As one KDR represents 20 ordinary shares, the 5,150 won close translates to just over 257 won (29.6 Singapore cents) a share. KDRs and Singapore shares are fungible - they can be converted from one to the other.
'The weakness in the Korea listing has dragged the Singapore counter down,' said CIMB analyst Jonathan Ng. 'This is a fungible market. People could have sold in Singapore and bought in Korea, especially because of the price difference.'
Mr Tan said the Chinese company had forgotten to 'connect with the hearts and minds' of Korean investors.
'If they were in Taiwan and Hong Kong, maybe they would have been able to connect the investors better, since they are a Chinese company in textiles.'
This point is not lost on China Gaoxian's chief financial officer, Mr Raymond Wong.
'Despite our publicity efforts, investors may not understand us and why we're in Korea. When they didn't see our share price go up on the first day, they could have sold us off too. This would have caused some short-term selling.'
He said an error on the Korea Exchange (KRX) website, which mistakenly states the KDRs' price-earnings ratio as much higher than it is, could have contributed to selling. Price-earnings is a key indicator of share value. If it is too high, it could indicate a stock is overvalued.
'The management has notified the KRX of the mistake and the KRX has agreed to fix it quickly,' he said.
Mr Wong said the firm will conduct more investor relations activities in Singapore and Korea. It will also engage a large investor relations firm in Korea to help.
China Gaoxian's KDR offer raised gross proceeds of 210 billion won, part of which will help fund upstream expansion to produce a key raw material.
Jan 28, 2011
China Gaoxian hit by poor showing in Seoul
By Jonathan Kwok
SHAREHOLDERS had bet that China Gaoxian's dual listing in Korea, which kicked off on Tuesday, would be a hit - and a boon to the company's shares listed on the Singapore Exchange (SGX) as well.
But the opposite has happened.
The counter here has tanked, after a particularly poor early showing by the textile company's Korean Depository Receipts (KDRs) in Seoul.
Since late December, investors here had chased the SGX counter to an all-time high of 45 cents on Jan10, on hopes of a good start in South Korea. However, all those gains have been erased.
SGX firms to have done well of late with dual listings abroad include Yangzijiang Shipbuilding and Super Group.
'People were looking at the likes of the successful Hong Kong and Taiwan listings, and they were extrapolating the potential rises into Gaoxian's KDR,' said Sias Research vice-president Roger Tan. 'But investors have spoken, and it has not done well.'
Since Tuesday, China Gaoxian's KDRs - the first to be launched by a Singapore-listed firm - have fallen 26per cent from their initial offering price of 7,000 won (S$7.70) to close yesterday at 5,150 won.
The SGX counter has also fallen sharply. The shares stabilised yesterday to end flat at 32 cents - still 27per cent, or 12 cents, below Monday's 44 cent close.
As one KDR represents 20 ordinary shares, the 5,150 won close translates to just over 257 won (29.6 Singapore cents) a share. KDRs and Singapore shares are fungible - they can be converted from one to the other.
'The weakness in the Korea listing has dragged the Singapore counter down,' said CIMB analyst Jonathan Ng. 'This is a fungible market. People could have sold in Singapore and bought in Korea, especially because of the price difference.'
Mr Tan said the Chinese company had forgotten to 'connect with the hearts and minds' of Korean investors.
'If they were in Taiwan and Hong Kong, maybe they would have been able to connect the investors better, since they are a Chinese company in textiles.'
This point is not lost on China Gaoxian's chief financial officer, Mr Raymond Wong.
'Despite our publicity efforts, investors may not understand us and why we're in Korea. When they didn't see our share price go up on the first day, they could have sold us off too. This would have caused some short-term selling.'
He said an error on the Korea Exchange (KRX) website, which mistakenly states the KDRs' price-earnings ratio as much higher than it is, could have contributed to selling. Price-earnings is a key indicator of share value. If it is too high, it could indicate a stock is overvalued.
'The management has notified the KRX of the mistake and the KRX has agreed to fix it quickly,' he said.
Mr Wong said the firm will conduct more investor relations activities in Singapore and Korea. It will also engage a large investor relations firm in Korea to help.
China Gaoxian's KDR offer raised gross proceeds of 210 billion won, part of which will help fund upstream expansion to produce a key raw material.
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