CHINESE FLOTATIONS WERE UNDERPRICED, WORLD BANK CLAIMS

The Chinese state put free money into the pockets of management insiders and professional traders through its underpricing of key assets, according to the World Bank in its latest quarterly report. The Bank also alleged that the underpricing was a contributory factor to the recent rapid rises in the Chinese stockmarket, up almost 200% in the past 18 months. The report calculates that the Chinese state would have raised some $9.5bn more this year if the privatised companies had been priced at their first-day close, with the price of shares on average some 70% higher than the initial listing price. “The government leaves a lot of money on the table”, claimed Bert Hofman, World Bank’s lead economist for China. Shares in assurer China Life rose by 96% during their first day of trading when the company floated on the mainland market in January. Meanwhile, the Chinese government has attempted to put the brakes on the Chinese stockmarket craze by tripling the stamp duty on share trades to 0.3%.