Shares in ChinaShanshui Cement Group, the country's second-largest cement producer, rose 7 percent on their debut on Friday after the firm raised $234 million in a Hong Kong initial public offering.
The company's strong share debut reflects the appeal of construction stocks that could benefit from China's surging economy, analysts said, but investors are generally sceptical about new listings amid worries about a global economic slowdown.
"The robust performance of Asia Cement's debut in May made investors confident in Shanshui Cement's IPO. But it is just a unique case, the overall IPO market is still very gloomy," said Francis Lun, general manager at Fulbright Securities.Shares in the Shandong-based cement producer had traded below its offer price on opening at HK$2.75, but rebounded in morning session and ended at HK$3.00, up 7 percent from its IPO price of HK$2.80 per share, near the bottom of its indicated range.
By comparison, its peer Asia Cement (China) Holdings Corp, a mainland Chinese arm of Taiwan's Asia Cement Corp, jumped 38 percent in its debut in May. It was the second strongest Hong Kong IPO in what has been a lacklustre 2008 for listings. Hong Kong's Hang Seng Index rose 0.9 percent on Friday, but has lost 17 percent since May in volatile trade as investors fret over rising inflation.
Analysts say cement stocks have further to fall after jumping on expectations of strong demand as Sichuan province rebuilds from a recent earthquake. Shares in top Chinese cement producer Anhui Conch Cement Co Ltd have fallen 23 percent since the start of May.
Anhui now trades at 17.7 times forecast earnings, more expensive than TCC International Holdings at 10 times. Shanshui Cement's closing price values the firm at 14.4 times prospective 2008 earnings forecast by sponsors. Billions of dollars in deals were shelved in the first half in Hong Kong as choppy markets made it difficult to price new issues.