CHINA
China Tobacco International (HK) Co. had some wild days in Hong Kong trading recently as investors scrambled to get a piece of the international unit of state monopoly China National Tobacco – the biggest maker of cigarettes in the world.
From its IPO in June at HK4.90 the price has gone up and down, and as of this writing in August is at HK25.00, over a 500% increase.
The company is easily the best-performing IPO in Hong Kong this year. Investors have been drawn in because of the scarcity of listed assets in China’s massive cigarette market, prompting comparisons with Kweichow Moutai Co., one of the country’s most widely held stocks because of its highly coveted brand of premium baijiu liquor.
While some analysts and fund managers say China Tobacco deserves a premium, others warn the stock’s run-up is overdone.“
The price surge is ridiculous and it just indicates the crazy and irrational investment behavior,” said Dickie Wong, executive director of research at Kingston Securities Ltd. in Hong Kong. “The current valuation is far higher than what it deserves. It’s understandable that investors bet on Chinese consumers’ love of tobacco and liquor, but we should still keep a clear mind.”