Institutional investors seen wanting to top up their holdings as airline begins trade Air China, the mainland's largest international carrier, is expected to gain 10 per cent to 15 per cent when it starts trading in Hong Kong and London today, underpinned by institutional investors wanting to top up their holdings. The market's continued strong liquidity and a drop in oil prices should also support the company - widely viewed as a China consumption play - which drew hefty retail and institutional demand for its $8.34 billion share offer. A potential threat to market sentiment, which some analysts said could have weighed on Air China's debut, was removed yesterday after the High Court dismissed a lawsuit challenging the listing of Hong Kong's first real estate investment trust. The two plaintiffs still have the option to appeal, but their financial backer, legislator Albert Cheng, said he would not continue to support the case, making a further challenge unlikely, according to market watchers. The mainland carrier, which was brought to market by China International Capital Corp and Merrill Lynch, priced its share offer at $2.98, which was in the upper half of its indicative range but below the maximum price of $3.10. 'The pricing was deliberately set at a level where it would offer upside versus the existing mainland carriers ... but I don't think we should expect a spectacular debut because it is a sizeable [initial public offering],' said Trevor Cheung, head of Hong Kong research at DBS Vickers. Brokers were also expecting heavy selling pressure from retail investors wanting to make a quick profit. 'If you look at recent [offerings] such as ZTE Corp and [China] Shineway Pharmaceutical, although their response was very hot, their share price performance was only so so,' said Steven Wai-yuen Leung, director at UOB Kay Hian Hong Kong. ZTE gained 10.91 per cent on its first day of trading last Thursday and has added 1.4 per cent since then. Shineway rose 10.67 per cent on its December 2 debut but has fallen 11.9 per cent to date and trades below its offer price. Still, retail investors ended up with 40 per cent of the Air China offer after subscribing for 83 times the shares available. With Cathay Pacific Airways having already agreed to take 32.5 per cent and 10 per cent earmarked for Japanese investors, other institutional investors ended up sharing only 17.5 per cent of the deal. 'Some China funds may want to top up their allocations when the shares start trading,' said Celestial Asia Securities head Herbert Lau, who projects the shares will rise 8 to 10 per cent on the first day. Others projected the price could jump to $3.50 initially. 'There have been some grey market bids for Air China at $3.25, but there have been no trades because people who were allotted shares are not interested in selling below $3.50,' one source said.
