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XD Electric debut dreams hit as shares fall
(China Daily/Agencies)
Updated: 2010-01-29 08:07
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China XD Electric Co, the nation's biggest maker of electricity transmission and distribution equipment, fell in its first day of trading in Shanghai, the first mainland company to drop below its offer price since 2006.
China XD Electric shares fell 1.4 percent to 7.79 yuan in Shanghai yesterday from the IPO price of 7.90 yuan. The benchmark Shanghai Composite Index rose 0.25 percent.
"The infallible tale of China's IPO shares has finally been dashed," said Larry Wan, the Shanghai-based deputy chief investment officer at KBC-Goldstate Fund Management Co, which oversees about $583 million. "Higher offer prices and weak market sentiment are the two major reasons behind XD Electric falling below its IPO price."
China XD Electric's debut comes as the Shanghai index has slumped 8.6 percent this year, making it the 10th-worst performer among the 94 benchmarks tracked globally by Bloomberg. The Xi'an, northwestern China-based company's IPO raised 10.3 billion yuan this month after initial sales raised more than 240 billion yuan since July 2009, when regulators ended a moratorium on new listings.
"It's a welcome development," said Steve Lee, CEO of HSBC Jintrust Fund Management Co, which manages $1.5 billion. "The market is telling us the price was too high."
Pricing system
The China Securities Regulatory Commission (CSRC) halted share sales in September 2008 to stem a decline in the benchmark equity index. It changed the IPO pricing system in May 2009 and resumed approvals for floats the following month to let companies price stocks based on investors' demand.
China's stocks regulator previously used so-called window guidance to cap the price for new stocks when it considered an offering to have been priced too high.
The change was designed to "improve the relevance between the IPO market and secondary market", the regulator said in a statement on its website in June last year. The CSRC also warned investors that "there may be cases where the offer prices are relatively too high and new stocks will fall below the offer price on their debut".
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The Shanghai Composite Index dropped below the 3000 level on Wednesday for the first time since Oct 30 and breached its 200-day moving average.
Air China Ltd, the nation's largest international carrier, fell as much as 2 percent on its debut in August 2006, before recovering to close at the offer price of 2.80 yuan. The airline was the last mainland company to fall below its IPO price on the first day of trading, according to news website Hexun.com.
