Qifeng Fiber plummets 18.9pc on trading debut
Acrylic fibre maker's poor performance may deter other companies from listing
Jilin Qifeng Chemical Fiber, the mainland's second-largest acrylic fibre manufacturer, dropped 18.93 per cent in its trading debut yesterday, making it the worst newcomer this year.
The stock closed at $1.37, compared with its initial offering price of $1.69.
The other new offers that declined on their debuts this year include Champion Reit, which fell 15.69 per cent, while Modern Beauty Salon Holdings dropped 9 per cent and Winbox International (Holdings) slid 5.45 per cent.
'Due to Jilin Qifeng's poor performance on the first trading day, some small and medium-sized enterprises may postpone their plans of selling their shares on the Hong Kong stock exchange,' said Kenny Tang Sing-hing, an associate director at Tung Tai Securities.
Mr Tang said local investors were more interested in buying shares of large companies and the weak debut of Qifeng Fiber reflected that the recent financial market was not suitable for small and medium-sized enterprises to raise funds.
Qifeng Fiber raised $399 million in its listing, arranged by Bank of China International. Ninety per cent of the offered shares were sold to institutional investors.
The retail tranche of the deal was barely 1.4 times covered. The lacklustre response forced the company to price the shares at $1.69 each, the bottom end of the indicative price range.
Patrick Yiu Ho-yin, an associate director at CASH Asset Management, said investors usually had relatively lower interest in industrial stocks, and this also explained why shares such as Qifeng Fiber were not attractive.
'Companies that are interested in selling their shares will be more cautious. Whether they will postpone their IPO plan will depend on market sentiment and their fund-raising size,' Mr Yiu said.
Qifeng Fiber shares were also hurt by the slump in the broader market, analysts said. Between May 8 and June 13, the benchmark Hang Seng Index dropped almost 12 per cent.
The recent market downturn derailed the IPOs by Shui On Land and two reits arranged by Sun Hung Kai Properties and Henderson Land Development.
Qifeng Fiber's profitability also worried investors because production cost of chemical fibre makers has been rising in recent years amid high crude oil prices.
'The profit margin of the petroleum product industry has narrowed from 20 per cent to around 10 per cent. Other stocks like Sinopec Yizheng Chemical Fibre are making losses,' Mr Tang. 'Also Jilin Qifeng's gearing ratio reaches 50 per cent, which is pretty high.'
Qifeng Fiber was established in 1995 and based in China's Jilin province. It owns 10 production lines with annual production capacity of 106,000 tonnes. Its products are sold across the country.
