Ningbo Port shares dip in Shanghai debut

PUBLISHED : Wednesday, 29 September, 2010, 12:00am
UPDATED : Wednesday, 29 September, 2010, 12:00am

Shares of Ningbo Port fell below its initial public offer price on its first trading day yesterday - a disappointing performance that is likely to further dent mainland investors' buying interest in new stocks.

The mainland's third-largest port operator opened at 3.72 yuan on the Shanghai Stock Exchange, before falling below the IPO price of 3.70 yuan five minutes later. It closed at 3.57 yuan - down 3.5 per cent.

The lacklustre debut came two weeks after the Agricultural Bank of China - the world's biggest public float this year - saw its A shares fall below the offer price, two months after its listing debut in Shanghai.

'The latest bad performance is another test for the mainland's IPO market,' said Citic Securities analyst Sun Chao. 'More newly listed stocks are likely to follow suit in the coming months as investors lose interest in IPOs.'

It is rare for a new mainland stock to fall on its debut. In the past two decades, nearly all IPOs have produced handsome first-day gains as investors flocked to what were considered a guaranteed return.

The mainland has been the world's largest IPO market this year, mainly thanks to the Agricultural Bank of China - the worst-performing lender among China's Big Four - completing a record US$22.1 billion dual IPO in Shanghai and Hong Kong.

In the first eight months, mainland companies raised a combined 576.5 billion yuan (HK$667.17 billion) on the Shanghai and Shenzhen stock exchanges, more than the full-year figure of 511.6 billion yuan in 2009.

Beijing used to require companies and underwriters to set IPO prices at about 20 times their earnings - a move to facilitate fund-raising activities by state-owned firms.

However, when the China Securities Regulatory Commission resumed IPOs in June last year after a nine-month hiatus, companies and underwriters were authorised to freely set offering prices in what the regulator described as 'letting the market forces rule'.

Initially, newly listed stocks continued to make dazzling trading debuts as investors still believed that IPOs were good buys.

Ningbo Port's IPO price of 3.70 yuan represented 29.3 times its 2009 earnings. The port operator raised 7.4 billion yuan by floating two billion shares.

Its first-day performance was also the worst among the 10 largest IPOs on the mainland this year. Analysts and investors had expected the regulator to slow down IPO approvals earlier this to bolster the weak market.

Before the July 15 Shanghai trading debut of the Agricultural Bank of China, the CSRC suspended new IPOs for a week to ensure a successful listing of the giant bank.

The regulator then accelerated the pace of new offerings, although the Shanghai Composite Index had emerged as one of the world's worst-performing indicators. The benchmark slid 0.41 per cent to 2,617.15 yesterday - 20.1 per cent down for the year so far.