HONG KONG: Shares in Beijing Jingkelong Co Ltd, the capital's second-largest supermarket operator, leapt 22 per cent to close at HK$5.5 (71 US cents) on their first day of trading in Hong Kong yesterday, boosted by investors' confidence in the mainland's booming retail sector.

Shares in the Beijing-based supermarket chain surged nearly 39 per cent soon after the market opened yesterday morning, reaching HK$6.25 (80 US cents).

Jingkelong had an IPO price of HK$4.50 (58 US cents), the top end of its indicative range.

With a more attractive valuation than its bigger rivals, Jingkelong's share sale in Hong Kong, which was oversubscribed 547 times in the retail portion and 60 times in the institutional section, has whetted investors' enthusiasm for China's retail sector.

The supermarket chain, which runs four hypermarkets, 34 supermarkets and 131 convenience stores, including self-managed and franchised outlets in the capital city, proposed an indicative price from HK$3.90 (50 US cents) to HK$4.50 (58 US cents) and offered 132 million H-shares, or 36 per cent of its enlarged share capital.

The top of its price range represents 19.7 times its 2006 earnings, whereas Jingkelong's rival Beijing supermarket operator Wumart Stores trades at 31 times its prospective profit.

Investor confidence has been boosted by the mainland's surging consumer-driven economy, with mainland retail already popular among institutional investors and the imminent "Golden Week" holiday likely to give a further fillip to retail shares, noted analysts.

Several offerings have demonstrated investors' interest in the sector, such as vintner Dynasty Fine Wines Group, sportswear retailer Li Ning and Mengniu Dairy, all of which have been heavily oversubscribed amid hopes that consumer spending on the mainland will continue to soar.

Retail sales of consumer goods in Beijing reached about 290.3 billion yuan (US$36.55 billion) in 2005, compared to 95 billion yuan (US$11.58 billion) in 1995, according to the Beijing Municipal Bureau of Statistics.

The mainland's retail sales rose 13.3 per cent to 5.4 trillion yuan (US$650 billion) last year as annual per capita disposable income increased 7.7 per cent to 9,422 yuan.

Sales in the mainland's top 30 retail chains surged 32.9 per cent to 384.56 billion yuan (US$46.9 billion) last year, according to official data.

A host of newly listed companies have recently seen their share prices leap around 20 to 30 per cent on their first trading day in Hong Kong.

Last week, shares in China Merchants Bank closed 25 per cent higher than their IPO price, while Jutal Offshore Oil Services Ltd's went up 49 per cent.

Jingkelong raised a total of HK$594 million (US$75 million) in a four-day sale of the retail tranche of its IPO from September 12 to 15.

The supermarket chain, which lists on the secondary Growth Enterprise Market, said earlier that it planned to use HK$282 million (US$36.6 million) of its IPO proceeds to expand its network in Beijing from the current 169 outlets to 255 by the end of 2008, in a bid to overtake its rivals.

Its first-half net profit soared 23 per cent year-on-year to 47.3 million yuan (HK$5.9 million).

The mainland's retail sector has attracted investments from foreign giants such as France's Carrefour, Wal-Mart from the United States, and Germany's Metro.

But the sector remains dominated by local players, including Shanghai Bailian Group, Beijing Wangfujing Group and Wumart.

(China Daily 09/26/2006 page11)