China Special Steel Holdings is in for a challenging debut on the stock market today, based on modest subscription rates and the way the shares have been allocated. Not only did the firm choose to award more shares to retail investors than required, but sole bookrunner and sponsor Cazenove also decided not to overallocate shares to institutional investors. That means the investment bank will have no shares to buy back as a way to help stabilise the price in case it falls. A price fall is possible given the weakness of the stock market and the lack of confidence in the steel sector. Investors have been especially concerned about weakening demand from carmakers, China Special Steel's biggest clients. 'It is likely that the shares will immediately fall below the offer price,' said Ben Kwong Man-bun, a director of investment services at KGI Asia, noting that recent newcomers have had a tough time. Three weeks after listing, Shanghai Electric Group is trading two cents below its $1.70 offer price. Fashion retailer Bauhaus International (Holdings), despite a strong debut last Thursday, closed two cents below its $1.25 offer price yesterday. China Special Steel priced its shares at the bottom end of the $1.48 to $1.85 range, allowing it to raise $266.4 million from the initial public offering. The size of the retail offer was increased to 20 per cent of the 180 million shares from 10 per cent through a reallocation of shares from the institutional offer, even though the retail tranche was only 9.84 times covered. Such a clawback is only required if the retail offer is 15 times covered, and given the typical retail investor tends to buy into new offerings with a short-term profit in mind it is unusual for a firm to set aside more shares for this part of the market than it needs to. One reason for doing so would be if there was insufficient interest from institutional investors to cover the rest of the book, bankers said. 'If the entire book isn't more than 1.25 times covered, it is difficult to overallocate any shares because it means clients will suddenly get a much bigger share of their orders than they would normally receive, and that would make them nervous,' one banker said. This was most likely to result in institutions dumping the additional shares on the market. Representatives from Cazenove declined to comment.