The chatter surrounding the water-cooler this past week has all been around the Chinese electric carmaker NIO and its blockbuster IPO. But excitement over NIO is already starting to fade, giving way to hunger for more hidden Chinese gems. Which superstar overseas IPO is going to excite traders next?

If you are looking to trade on the initial hype surrounding NIO, the moment may have already passed. After placing at the very bottom of its $6.25-8.25 initial price range, NIO shares surged to as high as $13.76 per share on the second day of public trading (+120%) before falling back to trade in a narrower 7.50-9.70 range this week. Right around the upper limit of the original IPO range, did you notice that?

Some would go as far as to say that the original valuation was right on the money and that the initial share price jumps were pure speculation. Or, in the words of former Fed chair Greenspan, “irrational exuberance”.

Not that there is anything bad about speculation and benefiting from hype around so-called “story stocks”. That’s called “momentum investing” and it can be a great strategy for many investors. But in the case of NIO, the excitement might have already played out and it’s time to look for the next great Chinese IPO to profit from.

If you are looking for something that’s hot right now, take a look at Meituan Dianping, a Hong Kong-listed mobile shopping platform that is backed by Chinese entertainment conglomerate Tencent. Shares in Meituan Dianping just debuted, but they have already jumped 7.2% at the start of trading.

Not quite as mind-boggling as NIO’s price moves perhaps, but pay attention that Meituan IPO floated at the top of its HK$60-72 range (at HK$69). It finished the Day 1 at HK$72.65, beating the IPO levels by around the same margin as where NIO currently trades relative to its floatation when all the dust has settled.

Comparing NIO’s and Meituan Dianping’s IPOs paints two radically different pictures. With NIO, institutional investors (original IPO subscribers) undervalued the firm, while follow-on retail investors were far more bullish. With Meituan Dianping, the situation is reversed: banks and brokerages appear to have confidence in the company’s ability to withstand intense competition from Chinese Alibaba-backed rivals, while retail investors are so far being cautious. Who is right and who is wrong, only time will tell.

Do you have an opinion on these two? Do banks know something that individual investors do not? Or are institutional investors being too skittish and NIO is the way to go?

Both NIO and Meituan Dianping are available on our trading platform and if you need a hand placing trades or doing background research on some of these foreign IPOs, give me a shout and we can discuss your options.

In the meantime, do keep an eye on the real prize that is shimmering on the horizon. Yes, I’m talking about Tencent Music, the long-awaited initial public offering of the Chinese behemoth’s music streaming affiliate. Tencent Music controls a whopping 75% of Chinese streaming market with twice as many customers as Spotify, which IPOd earlier this year.

To keep fully up to date on the latest corporate news in UK and around the world, sign up to our free Research & Trade ideas service. Because Tencent Music is an IPO you definitely don’t want to miss.

Avin Nirula, Trader, 21 September 2018