SHANGHAI: Shares of CITIC Securities Co Ltd, the first brokerage to go public in mainland China, made a limp market debut yesterday, boding ill for future fund-raisings by a struggling Chinese securities industry.
Analysts said dismal market conditions and a poor sector outlook marred the much-anticipated 1.8 billion yuan (US$217mil) listing by the unit of China’s largest financial conglomerate, China International Trust and Investment Corp (CITIG).
CITIC Securities’ yuan-denominated A shares closed up 11.3% at 5.01 yuan after opening at a 23% premium to the initial public offeiring (IPO) price of 4.5 yuan, a lacklustre performance by Chinese standards.
“The debut was weak mainly because the overall market is very weak,” said Dai Yizhong, an analyst at Guotai Junan Securities.
“In addition, investors were worried over the near-term prospects of the securities industry.”
Analysts on average had expected the IPO, already scaled back twice due to poor market sentiment, to trade at 6 yuan, a 33% rise against the IPO price.
While the debut was solid by global standards, analysts said it paled by Chinese norms due to a protracted market slump that has caused indices to fall 41% since peaking in June 2001.
Chinese IPOs are usually priced cheap to ensure strong subscription and often double on their first day of trade.
CITIC Securities’ poor showing could hinder plans by other brokerages to tap share markets, including top domestic names like Guotai Junan Securities, Haitong Securities and Guangfa Securities.
China is encouraging its brokerages to go public, hoping to augment an insular sector against rising foreign competition after the country joined the World Trade Organisation in 2001.
At least half of China’s 124 brokerages lost money in 2002, analysts said, hit by the stock market slump, a cut in share brokering commissions and a government-led corruption dragnet targeting share price rigging.
The benchmark Shanghai composite index is trading near a three-and-a-half-year low of 1,324.527, due to various factors including poor company earnings and too many IPOs. – Reuters