Is the failed listing of mainland oil giant CNOOC a signal of China fatigue or a symptom of short-term flu? On Friday, CNOOC withdrew a US$2.5 billion dual listing in Hong Kong and the United States, because a sharp cut in issue price the day before reportedly prompted Beijing to worry about the impact it would have on the future listings by the country's two largest oil and petrochemical companies early next year.
The issue price had been cut to $18 from an indicative range of $22 to $25 per American depositary share.
The aborted flotation has raised debate over whether Beijing is being unrealistic, if the company's sponsors have misread the market or investors have reined in their expectations for the mainland amid uncertainties over its economy and reform programmes.
Aggressive pricing was blamed for CNOOC's listing failure.
'Beijing has . . . not recognised that the market is not prepared at this point to pay the kind of premium that Beijing wants,' a Shanghai-based analyst said.
'If the price is right, nothing cannot be sold,' the analyst said. 'So Beijing was asking for a price the market didn't want to pay.' Investors are no longer prepared to pay a premium for mainland stocks in unattractive sectors following failures by many H shares and red chips to deliver over the past few years.
'Investors are willing to pay a premium for companies in high-growth sectors, but for oil and steel sectors, I don't think anybody will get excited . . . if you know how the oil industry or the steel industry is doing in China,' the analyst said.