I always got mixed up between Sinomem and Sinotel. Both are Sino companies, price is similar at around 60c, both prices have shot up quite a bit of late, both are in top volume.

Sinotel was halted on 3 Sep 2009 pending announcement, which turned out to be a share placement with price at slightly over 50c, a helfty discount of over 20% over 63c closed price before the announcement. At 2PM on4 Sep 2009, when the halt was lifted, its price gapped down to 60c as expected. Still it is good for placees who made immediate profit of 10c per share. I guess that is how the rich gets rich, huh.

It is not difficult to spot stocks that have potential to raise funds, whether by way of placement or rights issues. They are likely to have high volume recently, their price risen, sometimes in conjunction with analysts' positive reports. Some of the potential counters (my personal view and observation only, no guarantee of outcome) are Longcheer, Sinomem and China Environment.

So is fund raising a good or bad news?

To encourage investors to take up private placement or rights issues, the issue price has to be attractive, that means discount to the last traded price. So the normal immediate market reaction will be a gap down after the announcement.

In the short term, traders might choose to take profit if they think they have made enough profit.

But usually in the longer term, raising funds is good because the fund can be used to reduce debt or to fund new investment. At the same time, in order to "thank" the investors who are involved in the fund raising exercise, the operators behind will ultimately push up the price.