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Monday, 3 March 2008

Market Sentiments & IPOs

Last Friday we saw that launch of 3 IPOs, namely Joyas, Roxy-Pacific and Liheng, of which the biggest will be Li Heng. The underwriters tried to launch the IPOs when market was in the midst of staging a technical rebound and improving sentiments; what the underwriters didn't expect was the steep decline on Wall Street on Friday which dampened the mood and sentiments on Monday.

This period is one of the toughest to launch an IPO unless the owners are willing to sell their companies at very low single digit PEs (maybe 3-4x PE) if they want the price to remain above water post the listing. Let see how it goes for the 3 brave ones. I will follow up with a more detailed analysis of the 3 companies in the coming days but unless you are belong to the brave ones, my suggestion is to avoid applying for the IPOs for now. The risk is just not worth the effort.

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