Merchants Securities' debut hits new low for 2009 IPOs
By Pan Xiaoyi |
November 18, 2009, Wednesday
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Print Edition
Print Edition
CHINA Merchants Securities Co posted the smallest first-day trading gain yesterday since a 10-month ban on IPOs was lifted in June.
Analysts attributed the weak debut performance to its high valuation and waning market enthusiasm for IPOs.
Merchants Securities advanced 8.42 percent to close at 33.61 yuan (US$4.9) from its offer price of 31 yuan on its debut in Shanghai, after jumping 15.2 percent to hit an intra-day high of 35.7 yuan.
This compared with an average first-day gain of 81 percent for Chinese mainland companies that launched IPOs this year.
"The performance is within and even beyond my expectation as the stock is too expensive, leaving less room for a surge on its debut," said Tao Zheng'ao, a Donghai Securities analyst.
The company was valued at 56 times its 2008 earnings with its IPO price, in contrast to its counterpart CITIC Securities Co, which trades around a price-earnings ratio of 27.
Tao said he had expected the stock price to fall below its IPO price because there were some uncertainties over the brokerage's profitability.
"As one of the top three brokerages by market value following Haitong Securities and CITIC Securities, Merchants Securities is not expected to develop as fast as its smaller rivals. So the pricing may outpace its earnings prospects," said Tao.
China Merchants Securities, which raised 11.1 billion yuan in the share sale, said it would use the proceeds to boost operational capital, expanding asset management, investment banking, private equity investment and brokering activities.
Merchants Securities' debut was also dwarfed by a first-day gain of 29.98 percent by Everbright Securities in August. It was after start-ups rode a roller-coaster on China's Nasdaq-style ChiNext market in a speculative frenzy.
"It seemed there were fewer speculative surges in recent IPOs, indicating investors are more rational toward IPOs," said Song Jian, an analyst from China Minzu Securities Co.
China's benchmark Shanghai Composite Index also encountered more resistance on its way up after falling from an August 4 high on concerns China may tighten its relatively loose monetary policy.
Everbright Securities and other brokerages were dragged down by the weak debut performance while the Shanghai Composite Index added 0.24 percent yesterday.
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