Huadian's A share debuts with 78pc surge
The Shanghai A shares of Huadian Power International - the first to come to market since the central government implemented a market-focused system to determine pricing in initial public offerings - soared 78.96 per cent yesterday in their trading debut.
Analysts said the strong performance did not correspond with the company's operating fundamentals, and had more to do with the limited number of shares available for trade.
'It's more of a play of demand and supply rather than a reflection of company fundamentals,' said UBS head of regional utilities research Alice Hui Suk-fong.
'The company's H-share prices did not rise much in Hong Kong.'
The H shares finished 2.12 per cent higher at $2.40, off a high of $2.525.
Some analysts saw the A-share offer as a test of credibility for the government, which has pledged to nudge the country's markets off their protracted fall by using a mix of market liberalisations, new securities regulations and increased enforcement.
'The listing must succeed from the government's point of view,' said another analyst. 'Otherwise, it would have a negative impact on the already weak A-share market, which recently traded at a five-year low.'
Huadian, the largest power producer in Shandong province, saw its 765 million A shares rise to 4.51 yuan from their issue price of 2.52 yuan. The shares traded as high as 5.35 yuan.
Turnover was 792.12 million yuan, 10 times that of the A shares of the country's largest independent power producer, Huaneng Power International.
At yesterday's close, Huadian's A shares were valued at 21.48 times last year's estimated earnings, much higher than Huaneng's price-earnings ratio of 15.97.
