China Railway Construction sets mainland price

China Railway Construction Corp priced the mainland portion of its $5.4 billion Hong Kong and Shanghai IPO at the top of its range on strong demand for shares despite the recent market sell-off.

The company priced the mainland share portion of its initial public offering at 9.08 yuan per share, at the top of an 8-9.08 yuan range, said two sources involved in the deal.

Voracious demand for shares despite this year's market sell-off showed that investors view the infrastructure sector as a relatively safe haven and see value in new listings.

"China Railway Construction is a proxy for China's infrastructure industry, which is less affected by China's recent tightening policies. Investors like this sector," said Adam Tam, fund manager at Pacific Sun Investment Management in Hong Kong.

The order book was about 160 times subscribed in the online application portion, while institutional investors subscribed for 60 times the shares available to them, one of the sources said. Orders totaled roughly $430 billion, another source said, making the IPO the fourth-most popular on the mainland.

While the strong response is welcome news for an IPO market that had been stalled recently, China Railway Construction is regarded by many observers as a uniquely attractive proposition in the current market environment.

Another IPO hopeful, Evergrande Real Estate, is expected by some fund managers to have a harder time raising a hoped-for $2 billion in a Hong Kong IPO later this month. The mainland property industry has fallen out of favor after Beijing took numerous measures to forestall overheating in the sector.

While the IPO is on track to be the world's largest since Spanish green energy firm Iberdrola Renovables raised $6.5 billion in December, it would be surpassed by the potentially $18.8 billion share sale planned by US-based Visa Inc, the world's largest credit card network.

China Railway Construction will begin trading in Shanghai on March 10 and in Hong Kong on March 13. Its share sale was delayed from January due to the global market sell-off.

The company sold 2.45 billion mainland shares - less than it had originally targeted - raising 22.25 billion yuan. It is also selling 1.7 billion shares, or about 14 percent of its enlarged share capital, in Hong Kong at a range of HK$9.93-HK$10.70 each.

The order book will be opened to Hong Kong retail investors on Friday, with pricing likely to be set on March 6.

Agencies

(China Daily 02/28/2008 page15)