The buzz surrounding ChangXin Memory Technologies Ltd.’s anticipated IPO is also triggering anxiety in parts of China’s market, where investors recall earlier mega-deals that absorbed vast amounts of liquidity and marked turning points for equities.
Hefei-based CXMT, one of China’s high-tech crown jewels, won Shanghai exchange approval Wednesday for an IPO that could raise more than $5 billion including the over-allotment option. That would mark mainland China’s biggest listing since Cnooc Ltd. in 2022.
The fundraising comes amid a powerful memory-chip up-cycle fueled by the AI boom, which propelled Samsung Electronics Co., SK Hynix Inc. and Micron Technology Inc. into the ranks of trillion-dollar chipmakers this month.
For some investors, however, CXMT’s listing into the AI frenzy is dredging up memories of major market downturns that followed several landmark onshore listings in China.
“For many, CXMT’s listing harkens back to PetroChina’s debut in 2007,” said Wu Xianfeng, a fund manager at Shenzhen Longteng Assets Management Co. “Both are massive offerings that helped create some of the largest companies onshore at a time when the broader market had already rallied significantly.”
As enthusiasm around the deal builds, China’s chip-heavy Star 50 Index has climbed 35% this year on AI-driven demand for computing power.
Chinese stocks tend to rise 2.4% on average in the month before listings that raise more than 20 billion yuan ($2.9 billion), a study by analysts at China Merchants Securities found. The market then tends to fall in the week after the debut, dropping 0.8% on average, the study showed.
China’s IPO market is littered with such examples, with many of the country’s largest onshore listings arriving near market peaks. PetroChina’s $8.9 billion mainland debut in late 2007 came just weeks after the market topped out. Guotai Haitong Securities Co. listed less than a month after the 2015 bull-market peak, while the debuts of China Mobile Ltd. and Cnooc preceded a prolonged downturn in Chinese equities.
CXMT should be valued more like a cyclical commodity DRAM producer, Bloomberg Intelligence said. Its sales mix more closely resembles DRAM specialist Nanya Technology than high-bandwidth memory makers such as SK Hynix or Micron.
Mega IPOs can also siphon liquidity from the broader market after listing, tightening financial conditions and weighing on broader performance, Wu said. Still, he said longer-term market peaks are ultimately more tied to underlying industry fundamentals, making it premature to call a top.
Written by: Bloomberg News
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