Beijing Enterprises 1,276 times oversubscribed

Today's flotation of Beijing Enterprises looks certain to join the South Sea Bubble and the crazy market in 17th Century Dutch tulip bulbs in the record books of stock market manias. The Hong Kong-listed investment company makes its debut this morning after an issue of 150 million shares to raise just pounds 148.5m attracted applications worth a massive pounds 18.9bn.

The rush to apply for shares was so frenzied, market sources said, that it threatened the very stability of the colony's banking system. Trading in Beijing Enterprises is expected to be so frantic that the Hong Kong Stock Exchange is making arrangements to prevent the computerised trading system from crashing.

The Chinese-controlled investment company is coming to market with a record 1,276 times oversubscription rate. That means the vast majority of prospective investors will collect their refund cheques today from the Museum of Chinese Historical Relics; a venue apparently chosen without any sense of irony.

Most analysts predict the shares will soar three times above their issue price, although few believe they will be able to sustain such an extraordinarily high rating, which would represent something approaching 60 times the company's earnings.

The massive withdrawals from bank accounts to fund the share applications caused temporary liquidity problems as overnight rates soared to 26 per cent. It is quite possible that Beijing Enterprises will make almost as much from the listing process as it will from the modest HK$1,872m (pounds 148.5m) raised from the sale of the shares. However the company announced it was making the unprecedented concession of not cashing cheques for unsuccessful applications of fewer than 8,000 shares.

The avalanche of applications for Beijing Enterprises is a reflection of the current fad for newly issued red-chip counters. Red chips are companies controlled by Chinese mainland corporations or conducting the bulk of their business in China. Investors are buying political influence. Beijing Enterprises, for example, has been flaunting its connections with the local government in the Chinese capital and suggesting it has the political clout to broker deals which others cannot match.

Similar claims were made by Gitic Enterprises, whose share issue was oversubscribed by 892 times. Also a holding company, it is closely tied to government entities in Southern China.

An editorial in the Hongkong Standard newspaper described the scramble for Beijing Enterprises shares as an indication that China understood Hong Kong people far better than the British ever did. It said the new sovereign power was busy posting a huge dollar sign, understood by all and signifying few doubts about the future.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'