WHEN Zhenhai Refining and Chemical Company made its debut yesterday, it was like watching the final act of a poorly scripted play that everyone has seen all too many times before. The story begins, of course, when the merchant bankers over-value the initial public offering and ends in mock surprise as the shares plummet in trading. In the case of Zhenhai Refining, share prices sank over 11.5 per cent in the first 15 minutes of trading and dropped an additional 1.3 per cent during the rest of the day to close at $2.075. The share was priced at $2.38. Analysts have voiced concern for weeks that the company's fully-diluted prospective price-earnings (PE) multiple of 14.36 times was too high, given that both Shanghai Petrochemical and Yizheng Chemical trade at lower multiples. And the market has been unforgiving as well, with stock prices throughout Asia falling on news that the US Federal Reserve Board raised interest rates again. Even those recently listed companies which made a relatively strong showing on the first day of trading, such as Golden Harvest and Haixing Shipping, are now trading below their issue price. But merchant banks - in Zhenhai Refining's case, Barings Brothers - still do not seem to be getting the message. Given China's uncertain political future and the prospect of more economic belt-tightening as the mainland struggles to bring inflation under control, H shares are by nature riskier than those of other blue chips. What is more, investors now have more choices when it comes to trading shares in developing markets. Both India and South America are emerging as strong competitors to China in terms of attracting foreign capital. Although they have their own problems, the repeated overpricing of H share issues by investment banks serving the mainland will only encourage investors to put their money elsewhere.