Digital music provider A8 Digital Music Holdings jumped 36 percent yesterday during its market debut - the third-best initial public offering (IPO) this year.

Restaurant chain Little Sheep Group, however, couldn't match market expectations.

It opened low, at HK$2.90, and closed at its offering price of HK$3.18.

A8 Digital Music's strong performance bumped its shares' offering price of HK$1.90 to HK$2.58 on the day. It trailed just New Media Holdings and Asia Cement as having the best 2008 debut.

By comparison, the benchmark Hang Seng Index dropped 1.3 percent to 23,023.86 points.

"A8 Digital Music's strong performance is not surprising, as some investors are speculating the stock," said Ronald Wan, a managing director at BOCOM International. "However, Little Sheep's performance is disappointing, as the heavily subscribed stock didn't go up, even though it wasn't priced aggressively."

He said investors were still quite cautious as the market sentiment is still poor, and the two IPOs' performances are not enough to inject enthusiasm back into the volatile market.

Both companies received overwhelming response in their Hong Kong offerings. Shares in A8 Digital Music, which received 128 times subscriptions from retail investors, traded up 13.6 percent as the company impressed investors with its nitch business focus.

Meanwhile, Little Sheep, which received 72 times subscriptions, went up 6.9 percent in the gray market on Wednesday, according to Philips Securities, as investors backed the brand name of the well-known hot-pot chain.

Zhang Gang, chairman of Little Sheep, said the company's shares fell with the overall market yesterday, but said he believes that its share price will improve.

An investment banker from the sponsors of Little Sheep said the company's debut performance is already satisfactory, as the market has suddenly dropped so much this week.

The mid-range pricing of the company is out of the founders' long-term view in sharing the company's upside with investors.

A8 Digital Music priced its 91 million shares in the lower half of its indicative range of HK$1.66 to HK$2.38, raising HK$173 million in a Hong Kong IPO.

Little Sheep sold 245 million shares at the middle of its offering range between HK$2.68 and HK$3.68, raising HK$900 million.

Despite the cooling IPO sentiments, companies are still queuing up to list their shares in Hong Kong. An investment banker said that the pipelines for every bank are very strong, but whether it will actually be launched very much depends on the market conditions.

Chongqing Machinery & Electric, which will start trading today, priced its 1.004 billion H-shares at HK$1.30 each, the lower end of the indicative range between HK$1.30 and HK$1.70, raising about HK$1.31 billion. The retail subscription of its shares is 5.24 times covered.

(HK Edition 06/13/2008 page2)