CHINA’S regulators’ initial public offering (IPO) guidance sparked stock speculation as the market saw shares of 10 new listings in the last two weeks double or triple within one week of their trading debut.

    The securities regulator ended a 14-month IPO freeze in January, promising market-based reforms to revive one of the world’s worst-performing stock markets.

    Yet in the latest round of IPOs, the new listings again became a feast of rampant speculation by investors who prefer taking a quick profit rather than making a value investment.

    Analysts say the rise came as a result of window guidance by the China Securities Regulatory Commission (CRSC), the nation’s securities regulator.

    Prior to their IPOs, the CRSC urged the 10 companies to refrain from over-pricing, over-raising capital, and selling shares currently held by existing stakeholders.

    Such guidance, seen by stock underwriters and institutional investors as de facto interference, suppressed the offering prices of these stocks.

    Most of the new listings open- ed at a price no more than 20 times their 2013 earnings, which is below the average price-to-earning ratios in their respective sectors, suggesting cheaper valuation than their peers.

    Besides cheap valuation, institutional investors argued such interference disrupted a relatively market-based price discovery process during off-line share allocation. Institutional investors pitch what they think a soon-to-be public company is worth and the offering price is based on these quotes.

    With this administrative limit in place, institutional investors, who have participated in these off-line allocations, said figuring out the price has become simple math: divide the amount of capital a company wants to raise by the number of shares to be issued and you’ll get the offering price.

    Regulators also allocated more shares to be subscribed by retail investors this time. This has led to institutional investors scrambling for 10 percent of the shares some of the companies have put up for sale, while the remaining 90 percent are up for grabs for retail investors.

    Previously, some institutional investors would borrow to buy new stocks, but in the latest round of IPOs, some institutional investors were allocated only 2,000 shares, which squeezed out room for institutions to take a profit through leverage. (Xinhua)