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Weak market sentiment hits HK listing

(China Daily/Agencies)
Updated: 2008-06-19 11:18

Shares in Shandong Chenming Paper Holdings Ltd fell nearly 17 percent in their market debut yesterday, in line with expectations, after it raised $410 million in a Hong Kong initial public offering.

Investors' appetite for new listings in Hong Kong remains weak amid volatile global markets and concern over rising inflation, with the benchmark Hang Seng Index down 4.9 percent in June and 16 percent so far this year.

"I am not surprised about the lacklustre trading debut for Chenming. Investors are skeptical on equity trading, especially IPOs, which are not a guaranteed investment anymore," said Ben Kwong, chief operating officer at KGI Asia.

Shares in Chenming Paper, China's fourth-largest paper producer by capacity, failed to hit their IPO price of HK$9 per share, which was at the low end of its indicated range.

They rose as high as HK$8.25 and closed at HK$7.5, down 16.7 percent from the offering price.

The first-day performance lagged a 1.2 percent gain in Hong Kong's benchmark index.

The Hang Seng Index ended a volatile session yesterday, up 267.81 points at 23,325.8, following a rebound in the mainland stock markets.

Guotai Junan Securities and Macquarie sponsored Chenming's deal.

Chenming Paper is the first Chinese-listed company with all three types of shares - yuan-denominated A shares, foreign currency B shares and Hong Kong-listed H shares.

Its A shares have fallen 29 percent since it started its IPO marketing roadshow on May 26, and closed at 11.8 yuan yesterday.

The Chinese paper manufacturer, which offered 355.7 million shares, or 17.25 percent of its enlarged share capital, was 1.42 times covered in its Hong Kong retail public offering.

Chenming's closing H share price values the company at a multiple of 8 times 2008 earnings forecast by its sponsors.

By comparison, top Chinese packaging paper supplier Nine Dragons Paper (Holdings) Ltd trades at 11.6 times 2008 forecast earnings, while Lee & Man trades at 10.6 times.

Four companies are still willing to brave the weak market to raise a combined $2.1 billion, including Macao tycoon Stanley Ho's casino flagship Sociedade de Jogos de Macao and Glorious Property, which plan to raise $600 million and $1 billion, respectively.

Chinese sportswear maker Xdlong and China Shanshui Cement plan to raise $200 million and $305 million, respectively.