China Railway Construction's share offering hit the market with a bang on Friday, causing long lines of eager investors to form outside of banks and securities houses, all vying for a piece of the firm.

People are braving a choppy market to invest in the rail builder's stock. They're betting on the company's strong fundamentals and a reasonable valuation.

Some are even resorting to margin financing - borrowing money to buy shares.

Investors receive an advertisement brochure issued by China Railway Construction at a local bank on Friday. The company's IPO has become the hottest pick this year. Amy Lam

The initial public offering (IPO) attracted at least HK$50 billion in margin financing on its first public offering day, according to five brokerage firms. The subscription period will close on Wednesday.

"The deal has drawn strong demand," said Jeslie Chui, senior manager in the Global Market Department at Bank of China (Hong Kong), noting that the stock is a defensive one in a volatile market. Despite the delayed IPO listing - pushed back from January because of volatile market conditions - Chui said: "Investors still have high expectations for the IPO, as it is one of leading players in the industry with great upside potential".

Chui also noted that the naming of numerous tycoons, a Singapore state investor and a prestigious university as IPO buyers has also boosted confidence in the stock.

Some retail investors are now daring to borrow money to subscribe the shares, showing that "they have a firm belief that the stock can rise a lot on the first day," Chui added.

CASH Financial Service Group recommended a "buy" rating on the shares with their price ranging between HK$9.93 and HK$10.70 each, which represents a 2008 price-to-earnings ratio of 27 to 29 times, with a discount to China Railway Group's 32 to 37 times.

"As the market turnover has remained low recently, infrastructure company China Railway Construction should be able to draw an overwhelming response", CASH said in a research note on Friday.

China Railway Construction, which is about the same size as duopoly rival China Railway Group, could raise up to $5.4 billion in its dual Hong Kong and Shanghai IPO listings.

The company is selling 1.706 billion H-shares at between HK$9.9 and HK$10.7 each.

No Hong Kong IPOs were made in January, and just one company made its debut in February. Still, several listing hopefuls are in the pipeline, including property developer Evergrande and food manufacturer Want Want.

Meanwhile, market sentiment has recovered a bit this week after global markets recovered amid easing concerns over the United States subprime-crisis.

China Railway Construction priced the mainland share portion of its IPO at 9.08 yuan per share on Thursday, at the top of an 8.00-9.08 yuan range, freezing 3.13 trillion yuan.

Following the overwhelming responses in A-shares, the company is likely to price its H-shares at the top end of the price range, according to the CASH report.

China Railway Group's Hong Kong shares have jumped 60 percent since the company's dual IPO listing in December, and its Shanghai shares have more than doubled. The strong performance of China Railway Group has investors betting on the same strong debut for China Railway Construction.

The company will begin trading in Shanghai on March 10 and in Hong Kong on March 13.

(HK Edition 03/01/2008 page2)