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Caution cools Hong Kong IPO frenzy Hong Kong (AFP) Oct 7, 2009 Three more firms will list on the Hong Kong stock exchange Thursday, but analysts warned that cooling economic optimism and overpricing has been responsible for a series of disappointing debuts. Companies forced to shelve their listing plans after the US financial crisis set in had been tempted back by a rally of about 80 percent since early March on the benchmark Hang Seng index. But amid signs the US economy is not picking up as quickly as previously thought, that optimism is tailing off, just as dozens of Hong Kong firms are preparing to launch their IPOs. The three firms listing Thursday -- Ausnutria Dairy, China Vanadium Titano-Magnetite Mining and Yingde Gases -- will be hoping they do not follow Shenzhen-based logistics firm China South City Holdings which dived 23 percent. According to data company Dealogic, that debut last week was the worst ever on the Hang Seng for a listing over 50 million US dollars. In recent days there have also been disappointing showings from China's Glorious Property, which sunk 14.5 percent, and Peak Sport which fell 17.1 percent. Engineering and construction firm Metallurgical Corp of China, Hong Kong's biggest public offering this year, planned to raise up to 2.9 billion US dollars, but the stock lost 14.1 percent on its launch last month. And despite rising 28 percent on its Shanghai debut days before, it soon fell back to just a little above its listing price the day after. Eric Yuen, head of research at Dao Heng Securities, blamed aggressive pricing conceived at a time when the market was touching 2009 highs in September. "(Companies) took advantage of bullish market sentiment and many were priced at a premium to their competitors," he said. Private investors guided more by prevailing market sentiment than optimism about an individual company's prospects also helped fuel inflated prices, analysts said. "The market had a huge run-up and a lot of retail investors bought into the hype," said Jackson Wong, vice president of Tanrich Securities. Wong, like other market watchers, expects companies listing later in the year to price their stocks more reasonably as a result. "Unless pricing has been at the realistic end of the range or there is something distinctive about the company, people are likely to be very cautious," said Howard Gorges, vice chairman at South China Securities. Recent results compare unfavourably with the heady days before the collapse of US investment bank Lehman Brothers last year. E-commerce firm Alibaba.com's debut in November 2007 saw it surge 165 percent. As hopes for a recovery grew this year, there were some successful debuts including Sinopharm Group and China All Access which as late as September gained 15.8 percent and 13.1 percent respectively. And shares in China State Construction Engineering Group soared 60.3 percent on their July debut in Shanghai, as investors jumped on what was the world's largest stock offering in 16 months at the time. Although optimism has faltered, companies with an established reputation such as casino business Wynn Macau, which starts trading Friday, are seen as stronger than some of the smaller, mainland companies with IPO plans. In particular, mainland property companies eyeing a Hong Kong listing, such as Mingfa and Yuzhou Group, are expected to face strong competition after a glut of such stocks in Hong Kong. "They will need to price them at very attractive levels compared to the companies that are already listed," said Dao Heng's Yuen. Share This Article With Planet Earth
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US companies upbeat on China despite concerns: poll Washington (AFP) Oct 7, 2009 Most US companies doing business in China are profitable many want to step up investments despite fears on the economy, protectionism and intellectual property rights, a survey showed Wednesday. The poll by the US-China Business Council indicated that the global recession led to reduced sales and slowed investment plans for member companies as well as job cuts for some. ... read more |
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