The Rise of Private Investors in the Equity Market
As optimism returns to China's A-share market, prominent individual investors, commonly referred to as "bulls," are increasingly making their presence felt in the market for private placements, known as "定增" (Dingzeng). Recent data from the private equity platform, Private Placement Ranking, reveals that since the beginning of the fourth quarter, over ten listed companies have included these well-known figures on their subscription lists. Notable investors such as Ge Weidong, Guo Weisong, and Zhang Yu have surfaced frequently, demonstrating a marked enthusiasm exceeding that observed in the previous quarter.
Moreover, both public and private equity funds are rekindling their interest in participating in these private placements. Statistics show that, as of November 27, the number of private placement projects involving private equity firms has already surpassed that of the third quarter this year. Meanwhile, the total amount invested by public funds in private placements has seen an almost 100% increase compared to the third quarter. Market insiders speculate that as favorable policies gradually come into effect, market confidence will be boosted, making private placements—especially those with lock-up periods—more appealing to institutional investors. Specifically, sectors with significant growth potential, such as emerging industries, are especially worthy of attention.
Advertisement
The increasing presence of these influential investors in the private placements reflects shifts in market dynamics. Recently disclosed announcements about public offerings have shed light on these well-known investors' appetite for expansion. A recent company announcement indicated a public offering totaling nearly 500 million yuan (approximately $75 million) with allocations being made to notable investor Zhang Yu, who received an allocation of approximately 2.1 million shares valued at around 15 million yuan. Similarly, another company revealed a planned offering at 21.33 yuan per share, translating to a total fundraising attempts to raise over 360 million yuan, with Zhang Yu along with fellow investors Xue Xiaohua and Yang Yuezhi also included in the allocation list.
The statistics compiled by Private Placement Ranking confirm that, by November 26, nine prominent individual investors had partaken in 28 A-share listed companies' private placements this year, collectively securing approximately 1.88 billion yuan. Based on the closing price from November 26, they have realized paper profits totaling about 557 million yuan, equating to an average yield of roughly 29.52%—a remarkable achievement in the current financial landscape.
Digging deeper, the quarterly comparisons reveal that the fourth quarter has seen over ten listed companies engaging in private placements that feature these prominent investors widely, whereas only seven such companies appeared in the previous quarter's figures. This shift indicates a revenant sentiment and engagement in what was previously a stagnant market.
Beyond the bulls, the renewed enthusiasm exhibited by both public and private equity institutions is also noteworthy. Data from third-party platforms indicate that, as of November 27, a total of 124 public funds have participated in private placements, amounting to 1.21 billion yuan. This compares to merely 43 public funds involved in the third quarter, with investments around 631 million yuan. Concurrently, the private equity scene has seen participation in private placements exceeding that of the previous quarter's seven companies.
Commenting on this market revival, Tang Guangying, manager of a public fund specializing in private placements, noted that the market's sentiment had remained low during the first eight months of the year. However, the promising signals from policies rolled out by the end of September have significantly boosted market confidence. These supportive measures, especially in relation to mergers and acquisitions, primed the market for recovery. Moreover, the persistent high discount rates in the private placement arena enhance the attractiveness of these investments, prompting an upturn in institutional interest.
Chen Xingwen, Chief Strategy Officer at Heisaki Capital, shared his perspective on the present opportunities for engagement in private placements. He emphasized that the A-share market valuations, having undergone significant corrections, currently remain at relatively low levels. This creates advantageous pricing conditions for potential investments. Additionally, the regulatory landscape has tightened issuance requirements while simultaneously accommodating the reasonable financing needs of outstanding public companies, which is likely to elevate the overall quality of assets within the private placement market.
As institutional investors sharpen their focus, the emerging industries have caught their eye. Tang Guangying pinpointed that their strategic focus will encompass sectors characterized by new productive capabilities, looking specifically at areas like Technology, Media, and Telecommunications (TMT), electrical equipment, machinery, and biopharmaceuticals. In curating their investment selections, company research teams will prioritize factors such as valuation discounts, industry prospects, and the fundamental health of corporates. The objective will be to secure positions in well-established firms that are poised for growth, enjoy robust policy support, and possess core competitive advantages that are increasingly necessary in navigating the complexities of modern markets.