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By Kennix Chim
HONG KONG, Dec 7 (Reuters) - China Railway Group <0390.HK>
shares jumped as much as 30 percent on their Hong Kong debut on
Friday, beating forecasts, after the third-largest construction
contractor in the world raised US$5.5 billion in a Hong Kong and
Shanghai IPO.
The performance bucks a recent rocky trend for Hong Kong IPOs
as investors see China Railway as a proxy for the country's
railway investment boom as Beijing plans massive spending to help
ease bottlenecks triggered by robust economic growth.
But some market players said the strong debut was due in part
to support from China's new sovereign wealth fund and did not
necessarily bode well for upcoming IPOs.
"China Railway is a unique case. As China Investment Corp
bought a stake in it, it should perform better than some of the
recent laggards," said Y.K. Chan, a strategist at Phillip Capital
Management.
China Investment Corp bought $100 million worth of shares in
China Railway's offering, while other investors include the
Government of Singapore Investment Corp (GIC) and China Life
Insurance's <2628.HK> <LFC.N> parent.
Shares in China's largest construction company, which builds
railways, highways, ports and other big-ticket projects, rose as
high as HK$7.50, up from an IPO price of HK$5.78, which had been
at the top of an indicated range.
By the midsession, the stock was up 28 percent at HK$7.41,
outpacing a 0.6 percent gain in the benchmark Hang Seng Index
<.HSI>.
Hong Kong's index has edged up so far in December after
posting a 9 percent loss for November -- its worst month since
March 2004 -- as global financial turmoil knocked stock markets.
"We've got different conditions now than we had earlier. Now
we're upbeat so the IPO's got a premium, and in this sense, it's
a return to normal, said Howard Gorges, vice chairman of South
China Brokerage.
CAUTION
Sinotrans Shipping Ltd <0368.HK> and Sinotruk (Hong Kong) Ltd
<3808.HK> slid on their debuts last month, while department store
operator PCD Stores has postponed its IPO until January amid
worries over how hard the credit crunch will hit global markets.
"Investors are more cautious and selective about investing in
IPOs as market sentiment is volatile. I think infrastructure
should be investors' priority," said Lawrence Lo, vice president
at Lombard Odier Darier Hentsch (Asia) Ltd.
China's railway investment has lagged economic growth of at
least 10 percent a year since 2002. Beijing has now budgeted 1.2
trillion yuan in 2006-2010 for rail investment, more than four
times the figure for the previous five years.
China Railway <601390.SS> made its Shanghai debut on Monday
and its shares have jumped 74 percent in the week to Thursday
from an IPO price of 4.8 yuan. The company's Shanghai shares were
up 3 percent on Friday.
The share sale is the fifth-largest this year in Greater
China, based on Thomson Financial data. The deal generated orders
worth HK$402 billion (US$51.5 billion) from Hong Kong retail
investors alone to rank as the fourth most popular IPO ever for
Hong Kong individuals.
China Railway's first trading price in Hong Kong represents a
price-to-earnings multiple of 35 times 2008 forecast earnings of
its IPO underwriters, while its domestic A-share price trades at
about 43 times.
China's top ports builder China Communications Construction
Corp <1800.HK> trades at 40 times forecast 2008 earnings.
South Korea's Daewoo Engineering & Construction Co Ltd
<047040.KS> trades at 15 times projected 2008 earnings while
Hyundai Development Co <012630.KS> trades at 19 times. Gammon
India <GAMM.BO> trades at 40 times 2008 earnings.
China Railway sold 3.326 billion shares for the Hong Kong
portion of its IPO, or 16 percent of its enlarged share capital,
in a deal handled by BOC International, UBS <UBSN.VX> <UBS.N> and
JP Morgan <JPM.N>.
(US$1=HK$7.8=7.39 yuan)
(Editing by Anne Marie Roantree & Ian Geoghegan)
(([email protected]; +852 2843 6313; Reuters Messaging:
[email protected]))
Keywords: CHINARAILWAY IPO/
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Keywords: CHINARAILWAY IPO/
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Keywords: CHINARAILWAY IPO/