Railway Materials' IPO sends investors to exits

A plan by China Railway Materials to launch a 6 billion yuan (HK$7.35 billion) initial public offering in Shanghai sent mainland investors, already battered by worries of a flood of equity offerings later this year, running for the exits.

The Shanghai Composite Index lost 52.77 points or 2.37 per cent to 2,170.81 yesterday, crashing 1.3 per cent below the close of last year, when Shanghai was one of the world's worst performing stock markets. Analysts predict the downward spiral will continue in the coming days.

'The big IPOs exacerbated the bearish market sentiment,' Shenyin Wanguo Securities analyst Qian Qimin said. 'Investors are eager to cash out to avoid a further decline.'

If successful, Railway Materials' IPO plan to tap the A-share, or yuan-denominated, market would be the mainland's biggest IPO this year. The news added to investor fears that a flood of mega fund-raising deals are set to hit the weak market as Beijing accelerates listings by state-owned enterprises. Still, the steel supplier and logistics company has trimmed the size of its offer from a previous plan for an IPO last year. It also plans to float shares in Hong Kong.

Last week, Citic Heavy Industries raised 3.2 billion yuan via a Shanghai IPO, but had to slash the size of its fund-raising by nearly half.

Yesterday's drop in Shanghai's benchmark indicator, the biggest in a month, also resulted from a pessimistic mood about the mainland's economic growth. Consumer prices rose 2.2 per cent in June, according to official data released yesterday, below market expectations but fuelled worries that the mainland is headed for a severe economic slowdown.