A sign that the IPO market in Asia may be overheating is the case of BaWang International, which raised $214 million. The company makes shampoo, and the offering was oversubscribed by 400 times at the retail investor level. At the open, the firm’s shares will trade for 18 times earnings. The retail demand totalled $9 billion so most investors were turned away.

According to the AP, there has been a nine-month moratorium in IPOs in China.

The extraordinary IPO may not simply have to do with pent-up demand for new stock. China’s GDP is now expected to grow at 7% or better this year. Since exports are down, the Chinese government stimulus package, which is based on a $585 billion investment in the economy, may be helping to push up consumer spending among the country’s huge middle class. Part of the stimulus program is meant to give the middle class better access to credit.

Whatever the reasons for the demand for BaWang shares, earnings is not among them.

Douglas A. McIntyre