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Rash of recent IPOs weighs down MCC's offeringPublished: 21 Sep 2009 08:02:01 PST

Metallurgical Corp of China (MCC) Chairman Liu Benren at the listing ceremony yesterday. MCC was listed on Shanghai Stock Exchange with an issuing price of 5.42 yuan ($0.79)Photo: CFP

Metallurgical Corp of China, the firm that helped build Beijing's "Bird's Nest" Olympic stadium, made a modest debut in Shanghai Monday, in a sign that a flood of new equity is weighing on market sentiment.

The lukewarm start by the world's 12th biggest engineering contractor signaled that mainland share debuts, which have attracted heavy speculative buying, could struggle as firms line up to tap funding in a market that is down 15 percent from its 2009 high in early August.

That could pose a challenge for China International Travel Service Corp, the country's biggest travel agency, which is next in line with a Shanghai IPO expected to raise about 1.7 billion yuan ($249 million).

MCC shares opened 35 percent above their IPO price of 5.42 yuan ($0.79), slightly higher than a forecast by six analysts surveyed by Reuters, but well below the average first-day rise of more than 60 percent by other listed Chinese companies this year.

"This is a pretty weak debut, reflecting current market sentiment," said Li Xianming, strategist at Ping An Securities, "If the debut were a few days earlier, the price should have been higher."

Analysts said investors were also concerned about MCC's growth prospects given an expected slowdown in investment in a domestic steel industry facing huge overcapacity.

MCC, part-owned by leading steelmaker Baosteel, is China's oldest and biggest construction firm in the metals industry. Its businesses also include mining, equipment making and real estate development.

"MCC faces political and currency risks in its overseas mining projects," said Wang Dong, analyst at TX Investment Consulting Co.

"In China, slower investment in the iron and steel industry, as well as possible policy changes toward the steel sector, could hurt some of its businesses."

MCC has said it would use the IPO proceeds to pay for mining rights in Afghanistan, Argentina and Pakistan, and iron and steel projects in Australia, India, Vietnam and Mongolia. It would also repay bank borrowings and supplement working capital.

MCC's listing followed a 3 percent drop on the benchmark Shanghai Composite Index on Friday as investors worried about a surge in new equity supplies.

Reuters

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