Time for a return to sanity?

Greater China Technology, Hong Kong''s revenueless dotcom doctor, should help cure tech fever after sliding more than 50% on its first day of trading.

Investors in Greater China Technology, the dotcom doctor with no revenue, must be feeling pretty sick today. On its first day of trading on Hong Kong's Growth Enterprise Market, the stock has more than halved from its HK$1.38 listing price. The vast majority of investors obviously don't believe the peoples of Greater China, Japan and Korea are going to flock to the email inbox at www.greaterchinaherbs.com, cough up for their medicine and then wait for it to arrive in the post.

Who bought in the first place?

So who are the suckers that bought the story? Interestingly, there was no public offering; the 202 million new shares on offer were all placed - no doubt with the most favoured clients of the issue's lead managers.

In addition to the usual retail gamblers there were a fair few institutional investors putting their hands in the air to grab a slice of this one. Strange behaviour given that Nasdaq is going down the tubes and stockmarket reports the world over are using the "bubble burst" phrase at least once a day.

Stranger still when one takes into account that these people should have read the prospectus and seen the zero revenue track record of Greater China Technology.

The big question is why did they do it? For the fund managers the simple answer might be the fact it's other people's money they are playing with. That coupled with the fact some research report told them the on-line Chinese herbal medicine market would be worth $800 squillion in five years time. And it's a momentum play.

Spectacular losses, pure profit

Certainly in this latter respect they got it right. Over-hyped internet and technology stocks across the globe, even the better quality ones, have been heading south for a few weeks now. Still, Greater China Technology's first day losses are nonetheless pretty spectacular.

In part, the drop was so dramatic because parent company China Rich gave its own shareholders an 11% stake to play with, so reducing its own holding to 35%. These shareholders in turn are money-makers at any price, having paid zero for their shares, and exited en masse to turn a quick buck.

"Whatever price they sell at, it is pure profit," says Geoff Galbraith, deputy head of institutional sales at Dao Heng Securities.

Galbraith, who does not believe the end is nigh for tech stocks as a whole, reckons investors' best bet is to steer well clear of Greater China Technology.

"This is a typical fluff company that gets hit in a bear market," he says.