
Shenzhen-listed stock increases by 10% each day - igonvalue
https://www.google.com/finance?q=SHE%3A300431
======
zhoutong
It's a hugely underpriced IPO in a bubble (Tech stocks average P/E is over
100). +/\- 10% is the price limit in Chinese stock markets.

So rather than having a price jump, this stock continues going up with little
volume, until the "real market price" is reached.

Edit: It's oversubscribed by almost 300 times.
[http://mobile.reuters.com/article/idUSL3N0WI22B20150316?irpc...](http://mobile.reuters.com/article/idUSL3N0WI22B20150316?irpc=932)

~~~
dak1
Just how undervalued could it be with a market cap of 13.37 billion yuan
($2.15 billion)? And it appears to have been going up 10% daily since March 27
when it launched (it's up over 1000% already).

And if it was so incredibly underpriced... why was it so underpriced?

~~~
nine_k
Who is buying it, by the way? What is the probable source of their money?

~~~
encoderer
There is currently a margin (leverage) bubble in China. It will not end
pretty.

~~~
kleer001
the 500B-USD$ question is "When will it pop?"

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appliance_guide
see this article for well-written explanation:
[http://www.bloombergview.com/articles/2015-05-01/risky-
debt-...](http://www.bloombergview.com/articles/2015-05-01/risky-debt-and-
perfect-stocks)

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ComputerGuru
Ummm so how does one in the USA buy a Shenzhen-listed stock? I can't exactly
buy it from my fidelity.com account now, can I?

~~~
tibbon
It does seem that if there's no way to buy from the USA that there's a hell of
a business opportunity there. I know nothing about this, but if that gap
exists and anyone wants to work on the problem together... let's do this?

~~~
zhte415
The business opportunity exists in helping mainland investors move their money
outside China.

Matching those that want to invest in China and those moving their money
outside happens already, mainly via internet banking exchange of passwords and
sufficient trust in the middle-man. It is legal (it is not legal to swap
passwords, this is a simplification, but the crux of it), but an authorized
exchange of ownership of back accounts.

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dzhiurgis
It's odd that no one mentioned that they are makers of successful VR glasses:
[http://www.baofengmojing.cn](http://www.baofengmojing.cn)

I am amazed how quickly VR is taking of. This must be the 10nth manufacturer
using the same concept.

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kgc
What's going on here?

~~~
adventured
It can't go up any faster due to Chinese regulations

~~~
IkmoIkmo
Do they limit demand or fix (cap) the price it can be sold for artificially? I
imagine everyone would flock to buy the stock.

Beyond that, why did the stock IPO at such a low rate? All that's mentioned is
the price increase being limited, i.e. limiting volatility. Not a great idea
but, I can see how that works. But why did the stock start out so low in the
first place?

~~~
whyaduck
The daily increase is capped at 10%. All else being equal, in the real world,
the only way to limit demand is to raise the price - eventually it will reach
it's actual market value. Until then, "demand" doesn't really have much
meaning - it's essentially being rationed. What I don't understand is who's
selling?

~~~
IkmoIkmo
Who's selling? Well, imagine you wanted to sell your $300k ('market value')
house on the market, as you needed liquidity. But the government says its
price is capped at $25k. They enforce this by only letting notaries sign off
on sales at that price.

Ownership of a house by law is only valid once a notary (government worker)
signs off on the exchange of the deed, so nobody will buy the house without
the notary's signature, as then they'd pay but not officially receive
ownership. The seller who has the money, can now call the police and kick the
buyer out of the house, as the buyer can't prove he owns the house as he never
received the deed from a notary. So to sell, you must use a notary service,
and through the notary, $25k is exchanged hands.

Now obviously nobody will sell $300k value at $25k, and obviously there are
lots of home owners who at any point in time want liquidity and want to sell
the house for whatever reason.

The most sensible thing to me is 1) not many are selling, even if 1 out of a
million shares exchanges hands, whatever was the last price is the new price.
So the 10% gain can happen with insignificant volume. And 2) some people are
selling for $25k, while receiving $275k under the table through a different
deal. It'd be discounted as you'd likely need to launder the money which has
costs, but if the market price and the artificial price are far enough apart,
people will do it.

~~~
logfromblammo
The selling may be to route around the price restrictions. If the mandated IPO
price is $100, and the statutory maximum price change is +/-10% of the
previous closing price per day, and the true market price of shares is
$10,000.00, the procedure looks like this:

    
    
      Day 0: Buy 10000 shares at $100.
      Day 1: Ask $110.00 for 1 share.
      Day 2: Bid $121.00 for 1 share.
      Day 3: Ask $133.10 for 1 share.
      Day 4: Bid $146.41 for 1 share.
      .
      .
      .
      Day 48: Bid $9,701.72 for 1 share.
      Day 49: Ask $10,000.00 for 10000 shares.
      Day 50: Pay your patron tribute from the $98,994,971.
      Day 51: Start converting the remainder into foreign currency.
    

Following this patient strategy only costs you $5029, which ultimately goes to
your trading accomplice, who bought your share on odd-numbered days and sold
it back to you on even-numbered days. No black market transactions are
required.

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memossy
They got rid of most of the IPO pricing restrictions ages ago, now the primary
driver is liquidity and margin lending, with official margined shares making
up around 30% of the current free float and the Shenzhen market turning over
its free float every 7 days (!). To put the margin in context, for the US
market its around 3% of free float and you can margin 50-100%

ChiNext is on around 50x earnings now, most stocks above 5x PB. Could go
further though, brokers only 2/3rds through their margin limit...

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PaulHoule
Love that Sharpe ratio!

~~~
rev_bird
Huh. TIL.
[http://www.investopedia.com/terms/s/sharperatio.asp](http://www.investopedia.com/terms/s/sharperatio.asp)

------
calebm
They make a great radio: [http://www.amazon.com/BaoFeng-UV5R-Dual-Band-Two-
Way-Radio/d...](http://www.amazon.com/BaoFeng-UV5R-Dual-Band-Two-Way-
Radio/dp/B007H4VT7A) (cheap way to get into Ham).

~~~
rasz_pl
wrong Baofeng, and wrong 'great Baofeng radio' :), the great one is b5
[http://www.brickolore.com/2013/01/baofeng-uv-b5-best-kept-
se...](http://www.brickolore.com/2013/01/baofeng-uv-b5-best-kept-secret.html)

------
marincounty
NQ mobile--I still can't figure out what this stock does, or why the SEC has
not delisted them. I think when it all blows, like always-- the big boys will
have gotten out, and the little investor will have lost everything.

No wonder banks/investment houses are afraid of Elisabeth Warren? I feel she
know what the future holds?

That reminds me I need to get my cd out of .10 percent this week. Yes, I am
making .001 percent on my retirement. Homelessness--here I come! I'll even
mention the wonderful bank that didn't inform me of the rate change--lovely
Luther Burbank. "The bank that really keeps your info quiet!"

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peter303
China stock market = casino

invest only what you are not afraid to lose

~~~
crimsonalucard
Not so different from the US stock market.

~~~
smsm42
Mostly true if you trade short-term individual stocks. If you invest long term
in indexes, it's still risky but much less than casino-style risky and losing
all of it, short of total economy collapse in which case it wouldn't matter
where you invested, pretty much never happens.

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rolyatyasmar
Is there any way to buy this on the open exchange?

~~~
kifler
I'd be interested to know as well. My brokerage only lets me trade on 10
exchanges.

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haosdent
China stocks is crazying in these days

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cymetica
Increases by 10% everyday? On the front page of HN? Show's over. Now look for
the MMs to attract buyers as they short it on the way down for buco $$$.

