SHANGHAI, Oct 9: China Molybdenum Co Ltd nearly tripled from its initial public offering price in its Shanghai trading debut on Tuesday as investor appetite for mainland shares quickened ahead of a once-in-a-decade leadership transition in the country.
The Chinese producer of tungsten and molybdenum, already listed in Hong Kong, opened at 8.70 yuan compared with its IPO price of 3.00 yuan. The Shanghai Composite Index rose 1 percent in early trading.
Investor expectations that the government would take steps to keep the market stable ahead of the Communist Party Congress are fuelling a rebound in Chinese equities. At the congress next month, President Hu Jintao will step down as party chief, almost certainly making way for Vice President Xi Jinping to emerge as top leader.
But proceeds from the China Molybdenum IPO were much less than expected, at 600 million yuan ($95 million), reflecting slack demand for resource-related firms in a slowing economy.
‘This is the result of excessive pessimistic mood when the IPO price was set,’ said Zhang Fang, an analyst at Dong Xing Securities. ‘There is now renewed speculative interest in relatively small IPOs.’
Dongxing Securities expects China Molybdenum’s net profit would drop 2 percent this year due to weak demand for the metal.
Chinese steel-related firms have been struggling to post profits this year as slowing economic growth erodes demand from key downstream sectors like real estate and automobiles. They are also struggling with long-term structural issues including chronic overcapacity.
Executives at Baoshan Iron and Steel, China’s biggest listed steelmaker, speaking after posting a 53 percent drop in first-half profit last month, said the firm expected the third quarter to be the ‘most difficult’ of the year.
(AGENCIES)
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