Central bankers are not the only ones throwing moral hazard out of the window. Reliance Power, the Indian utility whose shares fell after last month’s initial public offering, has compensated new shareholders by awarding them free bonus shares.

This looks curious. Even a cursory glance at the prospectus showed investors were taking a big punt: Reliance Power is short on earnings and long on risk. Yet it is not the only Asian issuer redefining caveat emptor. Until June last year, subscribers in Korean IPOs were granted a put-back option whereby shares could be returned to the underwriter for 90 per cent of the IPO price within the first month of trading. In China, when domestic currency “A” shares held by state and other bodies became tradable – a switch that was always on the cards
– investors were compensated with bonus shares. Indeed, they were in effect compensated twice over, since reforms removing the “overhang” of shares helped revive then dormant Chinese stock markets.