Changing conditions in the Hong Kong new issues market |
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| Affiliation: | 1. Singapore Management University, Singapore;2. University of Wollongong, Australia;1. Department of Epidemiology and Biostatistics, Michigan State University, East Lansing, MI 48824,USA;2. School of Economics, Xiamen University, Fujian 361005, China;1. UQ Business School, Colin Clark Building, Blair Drive, University of Queensland, St Lucia, Queensland 4072, Australia;2. Standard Chartered Bank, 8 Marina Boulevard, Marina Bay Financial Centre Tower 1, 018981, Singapore;1. College of Business, Hankuk University of Foreign Studies, 107 Imun-dong, Dongdaemun-Gu, Seoul 130-791, Republic of Korea;2. School of Accounting, College of Business Administration, Florida International University, 11200 SW 8th Street, Miami, FL 33199, USA;3. College of Business Administration, Seoul National University 1 Gwanak-ro, Gwanak-gu, Seoul 151-916, Republic of Korea |
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| Abstract: | This paper examines the Hong Kong IPO market from August 1995 to July 1999 and finds that the time of the June 30 1997 political handover coincides with the transition in the IPO market from ‘hot’ to ‘cold’. Although the handover was an anticipated event, an explanation for the change in market is that the political handover created uncertainty among investors; a type of information asymmetry where all investors faced greater uncertainty. Our finding provides empirical support to literature which proposes that events in the months preceding the October 27 1997 correction in Asian stock markets facilitated a decline in confidence in financial markets, subsequently characterised as the ‘Asia Financial Crisis’. In addition, we find initial returns of newly listed stocks in the Hong Kong market are associated with market condition but not associated with any particular industry (i.e., PROPERTY) or geographic location (i.e., ‘H’ SHARES) suggesting that the prevailing market condition was spread more generally across issues. |
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