New World unit in dull debut as group shares receive blow
New World China Land has made a worse than expected stock exchange debut as investors dumped the stock in fear of a deteriorating investment environment amid the growing political cross-strait tension.
The company, which launched the biggest flotation in Hong Kong this year, closed at HK$8.45, down 11 per cent from its issue price of $9.50 - believed to be one of the worst trading debuts among the year's newly listed companies.
The poor performance came along with the drop of share prices in other companies of the New World group.
Its parent, New World Development (NWD), fell 3.19 per cent to $22.70.
New World Infrastructure, another listed unit of NWD, fell 5.81 per cent to $12.95.
Analysts said selling sentiment in the three companies was also prompted by the continued concerns that the yuan could be devalued.
Ambrose Chang, chief investment officer of Daiwa International Capital Management, said: 'I have prepared to lose [in the short term] but the loss is bigger than I have expected.' Daiwa International bought about US$300,000 worth of NWCL shares.
Mr Chang said his company would not dump the stock in the short term in anticipation of seeing an improvement in the mainland property market.
Speaking after NWCL's debut-trading ceremony, NWD chairman Cheng Yu-tung, said he was positive about the outlook for the mainland's housing sector due to strong demand and its housing reform policy.
Analysts said some investors would prefer to sell down their holdings of mainland stocks due to the political tension between Taiwan and the mainland.
They said the price fall was also due to the aggressive pricing of NWCL. NWCL raised HK$4.4 billion through the sale of 463.8 million new shares at $9.50 each - at the high end of a proposed price range of between $7 and $10.75.
Analysts said the shares had been dumped by unit trusts on concerns over the medium-term performance of the stock.
Mr Cheng yesterday also noted that NWD had no immediate plan to spin off its New World Services and was waiting for the right market sentiment.
'[We] will wait some time,' Mr Cheng said. He did not disclose a time frame.
New World Services, which includes construction firm Hip Hing Construction and its bus operation, had planned to seek a separate listing this year.
Meanwhile, Mr Cheng said NWD was looking at various investment opportunities, saying it was interested in bidding for the construction rights of the proposed Chinese medicine port and would keep an eye on Guangdong Enterprises.
In the property sector, Mr Cheng said the group would submit a tender for the multi-billion dollar phase three residential development at Kowloon Station.
The Mass Transit Railway Corp has set a July 23 deadline for interested parties to submit bids for the project.