GIVEN the size of the Maanshan Iron and Steel flotation, and the competition from other issues, there are suggestions that it will not be over-subscribed in the typically monstrous Hong Kong style.
But the current environment of maximum US bullishness towards China should mean a stellar performance for a direct play on mainland infrastructure development.
Maanshan is the eighth-largest steel company in China, but the largest mainland flotation in Hong Kong.
Brokers argue that the performance of some H-share offers has been disappointed, but even if Maanshan does no more than mirror the other four Chinese state flotations, the upside potential is enormous.
Maanshan is forecast to announce profits of 1.25 billion yuan (about HK$1.67 billion at the official rate) in the current year, and the shares are being launched at $2.27, representing a price-earnings multiple of 8.9, which increases to 13 if the figures are fully diluted for the new shares issued from the flotation.
However, the outlook is sufficiently positive that the shares should be trading at a strong premium to the stock market average of 15 times current year earnings, despite the fact that steel demand will reflect the enormous expenditure on infrastructure in China.
The Chinese steel industry is going through a rapid evolution from a state-controlled to a market-controlled system.