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Enoch Yiu

Mainland bank's maiden trading on HK exchange lacks expected windfall as it creates a  'one-stock game'

Hong Kong stocks fell for the first day in three yesterday as concern  about a potential bird flu outbreak among humans and rising interest rates continued to dampen investor sentiment.

But the key focus was China Construction Bank's (CCB) trading debut, which  failed to deliver a quick profit to short-term punters but overshadowed all other stocks in terms of trading volume.

Or, as one sales trader put it: 'It was most definitely a one-stock game.'

The mainland lender, which raised US$8 billion in a share offer that attracted US$80 billion worth of demand from institutional and retail investors, finished its first day flat at the $2.35 issue price after trading the entire day between $2.35 and $2.375.

But investors were pleased that it did not fall despite talk that the pricing, which valued the  lender at a premium to other Asian banks, had been too aggressive.

The Hang Seng Index finished the day down  77.08 points, or 0.53 per cent, at 14,381.06,  only a handful of points away from its intraday low. Only three index members finished higher, while another six were unchanged.

The H-share index dipped  24.63 points, or 0.51 per cent, to 4,776.21, although  interest in China-related stocks was greater than in the previous few days.

Turnover jumped to $23.83 billion from an average $16.2 billion in the previous three days but CCB accounted for a hefty 36 per cent of that despite the narrow intraday spread.

The bank saw 3.63 billion shares, or 13.7 per cent of its share offer, change hands, translating into a trading value of $8.58 billion - almost five times that of HSBC, which was the second most active stock.

HSBC and Bank of Communications both finished unchanged  at $121.50 and $3.20, respectively, drawing some comfort from CCB's solid debut. BOC  fell 0.69 per cent to $14.40.

Aside from preventing retail investors from making any money on their shares on the first day, CCB's one-spread trading range also resulted in the order queue for the stock being full for most of the day, one trader noted.

'That meant people were unable to place orders to position themselves in the queue exactly when they wanted,' he said.

The electronic trading system imposes a limit of 2,000 buy orders and 2,000 sell orders for each stock at each price which normally is not a problem  as the orders are spread over several different price levels.

For CCB, however, most orders were submitted either at $2.35 or at $2.375. Brokers said they expected CCB to continue to drift around the issue price in the next few sessions but noted Morgan Stanley will have less ammunition to support the price as the over-allotment option has now been partially used up.

The investment bank, which was joint bookrunner for the share offer  with  China International Capital Corp and  Credit Suisse First Boston, was actively buying back over-allocated shares at $2.35 yesterday.

'The market is likely to see more downside than upside ahead of the  [Fed] meeting and CCB won't be able to resist that. It will test the issue price again and again as we see continued outflow of funds,' said Core Pacific-Yamaichi International research director Alex Tang.

Meanwhile, Hong Kong Exchanges and Clearing chief executive Paul Chow Man-yiu poured cold water on hopes that early warrant issuance on CCB could help support the share price in the near term.

'As a regulator, it is a must for us to monitor the trading pattern of the shares for some time before we will allow warrants to be issued,' Mr Chow said after CCB's listing ceremony.

The HKEx  makes a liquid stock eligible for warrant issuance no earlier than 20 trading days or one calendar month after listing, while three CCB warrants were issued in Singapore  yesterday.

'[Hong Kong's] warrant regulation is appropriate for risk management purposes. We would not change the rules in response to what other markets are doing,' Mr Chow said.

Investors continued to sell tourism-related stocks amid fears the bird flu scare may dent travel demand and some pharmaceutical companies saw profit taking after hefty gains earlier in the week.

Air China fell 3.16 per cent to $2.30, China Eastern Airlines was off 2 per cent to 98 cents and Cathay Pacific Airways was the worst performing blue chip with a 3.53 per cent drop to $12.30.

China Pharmaceutical, which had rallied 23.13 per cent earlier in the week, tumbled 15.76 per cent to $1.39 and Dawnrays Pharmaceutical dipped 8.33 per cent to 55 cents after surging 17.65 per cent on Wednesday.

Property stocks were under pressure as investors expect the Federal Reserve's FOMC meeting on Tuesday to raise interest rates by another  25 basis points and the sector sub-index fell for a fourth straight day to end 1.02 per cent lower.

Sino Land dropped 2.75 per cent to $8.85, Cheung Kong  fell 0.92 per cent to $80.60 and Sun Hung Kai Properties was off 0.54 per cent at $73.50.

Among the H shares, Yanzhou Coal Mining slid 5.24 per cent to $4.975 after it said third-quarter earnings slumped 55 per cent as prices and production fell.

Jiangxi Copper gained 2.01 per cent to $3.80 and fellow gold and copper miner Zijin Mining added 3.12 per cent to $2.475 after the mainland government said it would close outdated plants and make it more difficult for companies to enter the  copper industry.



CCB debut fails to lift bird flu-hit sentiment