China Oriental makes strong HK debut

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Last updated at: (Beijing Time) Wednesday, March 03, 2004

China Oriental makes strong HK debut

Steel maker China Oriental bucked the trend on March 2, making a strong debut on the Hong Kong Stock Exchange against the backdrop of a falling market as investors' enthusiasm for H-shares continues.

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Steel maker China Oriental bucked the trend on March 2, making a strong debut on the Hong Kong Stock Exchange against the backdrop of a falling market as investors' enthusiasm for H-shares continues.

Its shares soared by 24 per cent from the offer price of HK$2.75 (US$0.352), closing at HK$3.42 (US$0.438) on March 2.

The stock was the second most active on the Hong Kong main-board market, with a total turnover of HK$1.73 billion (US$221.8 million).

In contrast, Hong Kong's benchmark Hang Seng Index dropped 187 points to 13,731, while the China Enterprise Index rose 35 points to 5,133.

China Oriental attracted massive market response, with the retail tranche of its HK$1.92 billion (US$246.1 million) share being oversubscribed 720 times.

The Tianjin-based company makes billets and strips and supplies them to steel manufacturers.

"It seems to be a recent norm that companies register a 20 to 30 per cent rise in shares on the first trading day, which are good enough to cover the investment cost," said Ben Kwong, associate director of KGI Asia.

China Oriental's competitive offer price of HK$2.75, combined with currently low financial costs helped push up the company's shares, he added.

Marco Mak, head of research at Tai Fook Securities, mainly attributed China Oriental's positive trading debut to its competitive share price against industry rivals.

The company sold its IPO shares at about eight times forecast 2003 earnings, which were cheaper than rivals like Ma'anshan Iron and Steel and Angang New Steel, according to Mak.

"Investors can easily compare these steel-related stocks and purchase the most competitively priced ones," he added.

Ma'anshan Iron and Steel and Angang New Steel also benefited from the market interests in China Oriental, shares of which rose by 4.8 per cent and 2.6 per cent respectively.

In addition, growing demand for steel in China added to the attractiveness of China Oriental, which mainly supplies to the domestic market, Mak said.

"Enthusiasm for initial public offerings shows little signs of abating, with particular light shedding on mainland companies," KGI Asia's Kwong said, adding he expected the H-share index would surge to 5,800 by the year's end.

Listing candidate Semiconductor Manufacturing International Corp, China's largest chip maker, is expected to raise up to US$1.59 billion in a dual listing in Hong Kong and New York later this month.

This is expected to be another IPO which will be eagerly snapped up.

Source: China Daily

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