Cashing in on an increasing appetite for red chips, Guangdong Investment is to raise $417.6 million by placing 80 million shares. Analysts say as the handover approaches, the run for red chips is gaining momentum as they seek to play the role formerly performed by British companies. UBS Equity Capital, underwriting the sale with Peregrine Brokerage, said investors had given the sale a spirited welcome, applying for as much as seven times the shares on offer. UBS Equity Capital executive director Johnny Chan said: 'The shares sold out in the first 20 minutes of sale. 'It's hard to give the level of subscription as we are building up the orders. 'But it could be between six and seven times.' A total of 80 million old shares will initially be placed with institutional investors by the company's parent, Guangdong Enterprises (Holdings) - the commercial arm of the Guangdong provincial government in Hong Kong. The shares, sold at $5.22 each, represent about 3.72 per cent of the existing share capital or 3.59 per cent of the enlarged share capital. The price represents a 2.43 per cent discount to the stock's close of $5.35 before it was suspended from trade in the afternoon yesterday. As part of the deal, Guangdong Enterprises will subscribe for 80 million new shares of Guangdong Investment at the same price, to avoid significant dilution in its holding in the listed counter. After the transactions, Guangdong Enterprises will hold about 37.88 per cent of the company, against 39.29 per cent previously. Share proceeds will be used for general working capital, underwriters say. A Guangdong Investment official said the plan to buy a stake in a Guangdong power plant for more than $200 million was going ahead. He would not give details about the project or any other infrastructure projects under study. Another official said earlier this month the company planned to invest between $500 million and $700 million on infrastructure and industrial projects this year. The share placement closely follows other share issues by red chips such as China Travel International Investment Hong Kong, China Overseas Land & Investment and Guangnan (Holdings). Recent market rumours have suggested possible asset injection into red chips by their parent companies. Red chips are those companies with a substantial equity stake held by mainland parties. Red chips offer quality management and sound earnings growth which some H shares and other Chinese counters could not provide, analysts said.