Japan Airlines shares strong in grey market ahead of listing

TOKYO, Sept 18 (Reuters) - Shares of Japan Airlines Co Ltd were nearly a tenth above their initial public offering price in unofficial trading on Tuesday, ahead of the carrier's public re-listing on Wednesday after its bankruptcy, traders said.

Two traders said Japan Airlines shares traded at 4,150 yen each on the grey market, 9.5 percent above the IPO price of 3,790 yen, which was set at the top of an indicated price range. Late last week, the shares were quoted at 4,100-4,120 yen in the grey market.

"We're pretty negative on the airline industry as a whole. There is so much new competition, low-cost carriers, and again the outlook is pretty tough," said one Tokyo-based analyst who didn't want to be named. "But this thing looks like it's priced to go."

The IPO, the second-biggest in the world this year after social network Facebook Inc's $16 billion offering, will raise 663 billion yen ($8.41 billion) - nearly double the 350 billion yen injected by a Japanese government-backed fund following Japan Airline's failure with $25 billion in debts in early 2010.

The fund, the Enterprise Turnaround Initiative Corporation of Japan, is selling its 96.5 percent stake in the airline in the IPO.

($1 = 78.8150 Japanese yen) (Reporting by Dominic Lau; Editing by Ian Geoghegan)