Hong Kong has been the second-largest market for IPOs this year with US$21.4 billion worth of listings. However, this Stock Market still carries a sulfuric reputation despite a tightening oversight from the regulator of the banks that underwrite initial share sales.

IPOs sponsored exclusively by local underwriters have been avoided for a long time –with nose pinching- by international investors, giving western investment bankers a unique opportunity to shine with their know-how and reputation.

But foreign firms have failed to raise standards to acceptable levels. Some of the globe’s biggest names have even been involved in a string of accounting scandals involving publicly traded Chinese companies, and in the process saddling investors with stinging losses.

In March of this year, JPMorgan Chase was humiliated when the Hong Kong Stock Exchange rejected the IPO application of Shenhua Health that was prepared by the bank.

Last week, UBS announced it could end up being fined and suspended from arranging Hong Kong IPOs in the future as the regulator moved to punish the Swiss bank for its questionable work on some initial offerings.

And now Standard Chartered disclosed on November 1st that the Hong Kong Securities and Futures Commission (SFC) warned that it “intends to take action” against the bank for its role as a joint sponsor on a share sale seven years ago.  The investigation could have “financial consequences” for Standard Chartered.

Coincidentally, last week also saw the biggest public offering in the U.S. this year, and second only to Alibaba in capital raised among China-based company IPOs. ZTO Express (ZTO), the Chinese courier service company, raised $1.4 billion after pricing above the price range as a result of very favorable investor response, with some sources mentioning an over-subscription as high as 15 times. Rating agencies were ecstatic and named ZTO the deal of the month, if not the deal of the year. We obviously fought hard to get a piece of the action and we were happy to succeed.

It turns out that ZTO Express was the flop of the year: it opened at $18.4, more than $1 lower than the initial price, having the worst first-day for a billion-dollar IPO in over 10 years. We thankfully managed to sell out at -10.26%.

Up and down is normal; it’s better to not focus too much on a single moment,” Lai Meisong, chairman of ZTO, said about the stock’s first-day performance.

Yeah, right.

Investors might have been first impressed by market growth then scared by competition” commented Seeking Alpha analyst Ivan Tang.

All that within a week…really?

With a more down to earth approach, Kristi Jones from IPO Boutique pointed the finger in the right direction: “ZTO and its underwriters…we are told by extremely strong sources… made the vast majority of allocations to Asia. Many of those indications were those of ‘fluff’ and highly inflated. Many of you may be aware of this phenomenon, but if you are not, quite often Chinese IPOs are often placed in weak hands and consequently immediately flipped with or without a premium. The situation became exacerbated once preliminary indications were being issued and those in the United States who received stock sold what looked to be a ‘falling knife.

For the record, ZTO’s lead underwriters were Morgan Stanley (Asia) and Goldman Sachs (Asia)…

Fortunately, that was our only setback this month, and the five other October deals we participated in were all winners with four of them bringing us double-digit returns.

The Year-to-Date Total Return on Investment is now +44.70%.