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SHANGHAI: Shares in China State Construction Engineering Group soared 60.3 per cent at their debut Wednesday in Shanghai as investors jumped on the world's largest stock offering in 16 months.
Shares in China's largest home builder opened at 6.70 yuan (98 US cents), up from an initial public offering price of 4.18 yuan, according to traders.
The IPO last week raised 50.16 billion yuan (7.3 billion dollars), making it the largest since US credit card group Visa Inc. raised 19.7 billion dollars in March 2008, according to financial data provider Dealogic.
Sixty-five minutes into the two-hour morning session on the Shanghai bourse, the share price was up 67.9 per cent at 7.02 yuan, traders said.
Wang Mingzhi, a Shanghai-based analyst with GF Securities, said the share price was now high above a "fair value" of about five yuan, which he said would more adequately reflect the company's fundamentals.
"The jump is obviously driven by speculative funds. It's hard to find a rational explanation," he told AFP.
China ended a nine-month moratorium on new IPOs in June, but it remains wary about overly dramatic price fluctuations on the first day of trading.
While allowing new IPOs, the securities regulator has issued rules aimed at reining in large surges in the price of newly listed shares, including a ban on investors using multiple accounts.
Banking regulators have also tightened lending rules in an attempt to prevent bank loans, extended as part of China's economic stimulus measures, from being used to speculate on the stock market.
But the moves seem to have had little effect. Sichuan Expressway, China's first IPO after the moratorium, soared 175 per cent at its debut in Shanghai on Monday.
Mao Nan, a Shanghai-based analyst with Orient Securities, called China State Construction Engineering Group's stock price "overvalued", saying it reflected the impact of speculative funds from both China and overseas.
"Hot money is flowing into the share market at the moment. With lots of cash at home and capital flowing in from abroad, the main problem of the market is excessive liquidity," he said.
While share prices are allowed only to fluctuate within a daily 10 per cent trading band, there are generally no limits on how much they can move on the first day of trading in China.
The underlying logic is that Chinese shares usually rise steeply on their debut, and it is considered better to let the investor enthusiasm play itself out within just one session.
The alternative would be that newly listed Chinese shares would close limit-up for several sessions after their initial debut.
- AFP/so
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