Magang set to beat forecast
A STRONG grey market price in the shares of Maanshan Iron & Steel (Magang) yesterday sparked suggestions that when the offer closes at midday today in Hong Kong, it will have beaten early estimates of a modest but successful over-subscription.
Market sources said yesterday that demand was good, but it was not expected to reach the bloated levels of over-subscription which have been seen in the past.
Some dealers yesterday were standing by the initial estimates of five to 10 times subscription which were made when details of the float were unveiled a week ago. Others, watching the grey market premium, suggested that the final outcome could see closer to 50 times the number of shares on offer in Hong Kong being applied for.
While this would be a long way below the 112 times over-subscription for Tsingtao Brewery, the sheer size of the $3.9 billion offer by Magang is expected to keep total subscription levels at a much more modest multiple.
Interbank interest rates in Hong Kong have been relatively stable over the past two days, suggesting that there has been no huge rush of cash for the $994 million worth of shares available in the Hong Kong tranche.
Trades between institutional investors, which are linked to the international placing of the stock, took place at between HK$2.70 and $2.80 yesterday, up from early grey market deals of $2.50 to $2.70.
This compares with the $2.27 offer price, and, if followed through when dealings start on November 3, would indicate a premium of around 25 per cent. This compares with the 114 per cent premium recently reached by Tsingtao Brewery.
Of the 1.73 billion shares being floated by Magang outside China, 25 per cent or 438 million are being offered in Hong Kong. The remaining 1.29 billion were placed internationally ahead of the public offer at $2.27 per share.
Analysts in Hong Kong yesterday said the international institutions had been enthusiastic about the group.
''It is the cheapest steel stock in the world,'' said Ewan Cameron-Watt of SG Warburg.
, one of the co-lead managers of the issue.
While a relatively small over-subscription might not generate as much excitement as the avalanches of demand seen for Hong Kong stocks in the past, the authorities would regard it as much better for the market's image.
Vast over-subscriptions suggest an element of under-pricing in a deliberate attempt to drum up demand from speculators looking for a quick profit.