China Coal fails to sizzle on debut
Daniel Ren in Shanghai and Nick Westra
31.9pc gain worst in 15 months on mainland
China Coal Energy had a less than perfect start yesterday after its shares rose just 31.91 per cent, the smallest first-day gain in 15 months for stocks on the mainland, as the market posted its biggest weekly drop in 11 years.
Shares of the country's second-largest coal producer closed at 22.20 yuan, up 5.37 yuan from the initial public offering price of 16.83 yuan.
'In such a weak market, the lacklustre trading debut was within expectations,' Citic Securities analyst Wang Ye said. 'Coal companies are off investors' screens these days on the belief that they are hugely overvalued.'
China Coal's lacklustre start reflects the end of a bull run on the mainland's equity market where 97 new listings gained an average of 193 per cent on the first trading day last year.
Goldman Sachs downgraded China Coal's H-share price recently, citing its high valuation. The company's H shares closed at HK$18.42, or a 23.5 per cent discount to the Shanghai-listed A shares.
The closing price of the A shares translates into 59 times China Coal's forecast earnings for this year.
China Jianyin Investment said in a research note that China Coal, an also-ran to China Shenhua Energy, lagged far behind its main rival in terms of technology, capital base and reserve.
Still, analysts said its weak performance yesterday mainly resulted from pessimism across the board.
The Shanghai Composite Index tumbled 440.921 points or 9.26 per cent for the week, the sharpest weekly fall since the week to May 16, 1997. It was 29.08 per cent off its record high of 6,092.057 on October 16. It ended yesterday down 62.626 points or 1.43 per cent.
The slump was a sign that the equity market was on its sick bed, fund managers and brokers said. They cautioned that Beijing would risk provoking public anger if it took no action to prop up the market.
'The situation can't be worse,' said Gu Weiyong, the chief investment officer at Ucon Investment Consulting. 'The good days have come to an end.'
Falling victim to a global downturn and the severe snowstorms, the market plummeted amid panic selling as investors urged Beijing to launch incentives to restore confidence.
A market collapse could become a prickly political issue and fuel possible social unrest as millions of individual investors had bet their savings to chase returns, analysts said.
International investment banks said Hong Kong-listed mainland-affiliated companies would be more attractive than their A-share counterparts this year amid lower valuations.
Perhaps taking a cue, the Hang Seng Index yesterday surged the most in one day this week, as investors speculated that the market had fallen beyond its fair value and chased after battered stocks.
The benchmark rose 667.84 points or 2.85 per cent to 24,123.58 largely on an afternoon rally that tacked on more than 450 points. Despite the strong finish, the market still dropped 3.98 per cent on the week.
After a long week of losses, the H-share index yesterday posted a 6.41 per cent gain to 13,284.74 points.
'The selling pressure on mainland banking stocks and property stocks was released, driving a short-term rebound,' said Michael Wong, a research director at Hantec Investment.
Industrial and Commercial Bank of China snapped a four-day decline, surging 9.72 per cent to HK$5.08.
Oil producer CNOOC jumped 7.66 per cent to HK$11.80 while Hong Kong Exchanges and Clearing added 6.16 per cent to HK$170.70.