The Research Of New Stock’s Overpricing And Influence In Chinese GEM

Since the Chinese stock market was established, new shares subscription had always been considered as the safe investment zone, while the overpricing phenomenon has shattered the Chinese long-time issuing covert rules "Three Highs"(high issuing price, high PE ratio&high proportion of super raised funds), in which the GEM is the most prominent. GEM is still a new-born market, new shares difficult to get was one phenomenon of Chinese capital market. Overpricing, was only a small probability event, however, GEM’s overpricing trend makes the investors lost and confused. Lock-in is a big probability event no matter what method the investor takes. GEM’s overpricing is the consequence of each participant’s game playing, among which the market quotation, issuer, consignee and investors’behavior are major factors that affect whether the new stocks is overpriced.China’s Growth Enterprise (GEM) Market is different from the Main Board Market and the Small&Medium Enterprise Board Market. GEM Market is an emerging market, not only capital stock is much smaller than developed countries’mature financial markets, but also more fluctuant. The market fluctuation has its unique characteristics. Comparing with Shenzhen Main Board, Small&Medium Enterprise Board, GEM initial public offering request is low, which the company scale is small but the growth is strong. Meanwhile, the GEM’ overpricing is result of the game, including all market issuers, underwriters, investors, which are the important factors.By statistic and multiple regression analyzing the factors and incidence of GEM first month overpricing, this article concludes that:the incidence of overpricing has negative correlation with limited sales share proportion, big shareholders shareholding proportion and the ratio of super raised fund; positive correlation with the first turnover rate, IPO P/E ratio, issue price, ROA, ROE; related with market sentiment (the rate of stock issuing fee, the rate of winning the lot for IPO) and the closing price of Shanghai&Shenzhen300, which effectively makes up for the existing GEM IPO pricing model and processing theory, helping the issuer to efficiently control the issuing risk, assisting the consignee to reduce the risk of consignment sales, guiding the investor to invest rationally, decreasing the sheep-flock effect and blindly following speculation, improving the rate of returning on investment; it also leads the limited capital to be optimally collocated between the primary market and secondly market, eliminating the appearance of huge funds staying in the primary market for gaining the new shares, which results in shortages of funds in secondly market, further more to promote the overall coordinated development of stock market.