China Railway Group easily raised the maximum HK$19.2 billion target for its initial public offering after a flood of orders from global investors, a sign it will not join the growing list of recent first-day trading failures. China Railway, the world's third-biggest construction contractor, fixed its H-share offering at the high end of expected prices, according to a source close to the deal. The company's shares will make their trading debut in Hong Kong next Friday and in Shanghai on Monday. China Railway sold 3.326 billion H shares at HK$5.78 each amid strong bidding from institutional and retail investors, the source said. It marketed the shares at between HK$5.03 and HK$5.78. The offering to retail investors was more than 208 times covered, leading to the retail tranche being increased to 25 per cent from 10 per cent. The company also drew strong demand from institutions which submitted more than US$60 billion worth of orders. 'The recent market weakness has not had a negative impact on China Railway, as people are still rushing to find good investments,' said another source, adding that demand from the oil-rich Middle East was strong. At the same time, China Railway raised 23.6 billion yuan selling A shares on the mainland market, fixing the price at 4.80 yuan each. The combined offering in Hong Kong and the mainland amounts to US$5.5 billion, making it the fifth-biggest initial public offering on the mainland this year, according to Thomson Financial. China Railway is expected to gain from the country's accelerating infrastructure investment from highways to airports. Beijing plans to spend 3.8 trillion yuan on transport and infrastructure construction until 2010. The company's earnings potential means it is likely to shrug off the negative impact of other recent market debuts. Sinotruk (Hong Kong) dived 15.68 per cent on its trading debut this week while Sinotrans Shipping sank 12.96 per cent. As of yesterday, Sinotruk and Sinotrans were still 5.1 per cent and 16.1 per cent respectively below their offer prices. Analysts say high market volatility and uncertainties over the health of the global financial market have dampened investor demand for some smaller offerings. Dongyue Group, the mainland's largest fluorochemical firm, priced its shares at the low end of its expected range yesterday, sources said. 'The greater volatility in the global market recently has reduced hedge fund appetite for participating in initial public offerings,' said one banker working on a Hong Kong share sale. 'To be honest, they have been the biggest buyers in the [initial public offering] market.' BYD Electric, spun off from BYD, also got a lower valuation than planned for its HK$7.7 billion offering, one source said. It was selling 550 million shares at HK$10.74 to HK$14 each, or 13.6 to 17.7 times the firm's earnings next year, the source said. Breaking the jinx Hot response shows China Railway will not be a first-day flop The number of times the company's retail offering of 332.6 million H shares was subscribed: 208 Institutions submitted orders for shares worth more than, in US$: $60b
