IPO exuberance could cause sustained rout in China's market

Beijing

THE 6 per cent dip in Shanghai stocks over just three days could be the end of a 10-month bull market. More likely, speculation is changing form, and the exuberance is being diverted into newly listed stocks. This excitement could prove its own undoing.

The Shanghai Composite fell as much as 2 per cent on the morning of May 7, blowing some of the froth off an index that has doubled in less than a year. Such price moves are not scientific, though there are reasons that investors might be rethinking. Economic data shows that a slowdown is continuing, and the country's ruling Politburo warned at the end of April that pressure is mounting. Property transactions, the main rival to stocks when it comes to…