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Tepid launch for China Shipbuilding
Published on: 2009-12-17
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China Shipbuilding Industry, one of the largest mainland initial public offerings this year, made a subdued debut on the Shanghai stock market yesterday, reflecting a mood of caution due to a glut of year-end IPOs and the high pricing of some recent offerings.

China Shipbuilding shares rose only 12 per cent to close at Rmb8.30, up from an IPO price of Rmb7.38. According to figures supplied by Dealogic, it was the third smallest initial gain by new mainland offerings since Beijing lifted a de facto moratorium on IPOs about six months ago. China Shipbuilding raised Rmb14.7bn ($2.1bn) in the share sale, which valued the company at about 42 times earnings, higher than the benchmark Shanghai Composite index.

The sheer volume of IPOs on mainland markets means stocks are no longer jumping to the same extent on their first day of trading, stock market analysts said yesterday. Earlier this week, it emerged that Chinese stock exchanges, including Hong Kong, had overtaken the US in the amount of money raised by public offerings. The US had dominated global IPOs by exchange nationality every year apart from 2006, since Dealogic began ranking exchanges in 1995. New mainland listings have totalled $25.2bn from 96 deals so far this year, says Dealogic.

Chinese and Hong Kong companies account for seven of the 10 top global IPOs this year, according to figures compiled by Bloomberg.

But several recent big offerings have seen a smaller than expected first day trading premium. Two of the mainland's largest IPOs - China Merchants Securities and Metallurgical Corp of China - rose only 8.4 and 10.9 per cent respectively on their first day of trading. China Merchants Securities this week became the first IPO this year to close below its issue price.

Mr Dai Shuang, analyst with Shenzhen-based United Securities, said one reason for the subdued debut for China Shipbuilding was that the market was glutted with IPOs. Ms Lin Jin, analyst with Shanghai-based Shenyin & Wanguo Securities said the performance of China Merchants Securities stock also depressed China Shipbuilding's debut.

China Shipbuilding's first day performance was much less impressive than debuts earlier this year, immediately after the offering moratorium was lifted in June. China State Construction Engineering, which raised Rmb50bn in July, jumped 56 per cent on its debut, though it has since fallen by about 25 per cent.

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