Uncertainty clouds China Yongda IPO

Poor investor sentiment has clouded the initial public offering of mainland car dealer China Yongda.

Last week it was reported to be oversubscribed but now it has extended its offer period after some investors withdrew their orders.

This follows earlier news that copper miner China Nonferrous Metal Mining (CNMC) had postponed a second bid to list its shares on the Hong Kong market.

Plagued by the euro-zone crisis, the Hang Seng Index ended the week at 18,713 points, down 12.18 per cent since May 1.

Shares of a number of locally listed car dealers, including ZhengTong Auto and Baoxin Auto, have been among the hardest-hit stocks, with ZhengTong trading yesterday at a discount of more than 35 per cent to its listing price.

A glimmer of good news for the IPO market is that present poor market sentiment has not affected the listing plans of jeweller Graff Diamonds. The jeweller will hold an IPO briefing today and a person close to the issue said there were already good orders for the shares from 'quality names'.

China Yongda was forced to extend its offering period to Monday after some investors were reported to have withdrawn their orders amid the grim conditions on the Hong Kong stock market, according to a person familiar with the deal.

'The deteriorating market conditions and the share prices of [Yongda]'s competitors have hit the offering hard and some investors were scared off,' the source said. 'But we are almost there and I am hopeful there may be some new placings over the weekend.'

The source said the Shanghai-based dealer, the second-largest trader of luxury brands such as Audi and BMW in eastern provinces, would rather postpone its listing than lower its offer price.

The offer price has been set at between HK$7.60 and HK$10.80 a share.

This would enable the company to raise up to HK$3.37 billion to finance national expansion plans.

CNMC delayed its listing plan late last year because of uncertain market conditions after receiving approval from the Hong Kong stock exchange for a US$1 billion share offer. It was due to launch a scaled-down bid on Monday to raise US$500 million, but postponed the offer again because management 'wanted more communications with investors', people familiar with the deal said.

Meanwhile, China Auto Rental - the first Chinese firm seeking to list on New York's Nasdaq exchange, said it had withdrawn its application due to the poor market situation.