UPDATE 2-Stellar Hyundai Rotem debut lifts S.Korea IPO market outlook
* Hyundai Rotem surges nearly 70 pct in debut
* Successful listing bodes well for more IPOs
* But analysts do not expect an immediate flood
* Hyundai Rotem now valued at $3.1 bln (Recasts to add South Korean IPO market prospects)
By Miyoung Kim
SEOUL, Oct 30 (Reuters) - South Korean train manufacturer Hyundai Rotem Co soared almost 70 percent in its market debut on Wednesday, brightening prospects for a swathe of potential domestic offerings that have been put on the backburner for almost two years.
Prospective listings from the likes of Hyundai Oilbank and POSCO Specialty Steel were shelved as fast-growing Southeast Asian markets became the focus for global investors and as hints from the U.S. Federal Reserve that it may cut its bond-buying programme threw financial markets into turmoil.
But an early Federal Reserve tapering now looks less likely and South Korean equities have come back in vogue due to firmer economic and corporate fundamentals compared other emerging markets.
Hyundai Rotem's $587 million IPO marks South Korea's biggest offering three years. Prior to that, the country had not seen an IPO bigger than 300 billion won ($283 million) since 2011.
The train manufacturer ended trade at 38,750 won on Wednesday, valuing the firm at 3.29 trillion won ($3.1 billion). That compares with an IPO price of 23,000 won, pricing that came at the top end of its indicative range.
"It's a major heavy machinery issue with sizable business coming on to the market, and investors are adding it to their portfolio to better track the market," said Han Beom-ho, an analyst at Shinhan Investment & Securities.
The upswing in South Korean shares has been driven by foreign investors, who were net buyers of South Korean stocks for a record 44th consecutive session on Wednesday, bringing their cumulative net purchases for the period to 13.8 trillion won.
The benchmark Korea Composite Stock Price Index (KOSPI) is trading close to 2013 highs, having gained 8 percent in the last three months.
NOT A FLOOD
But while more firms are likely to come to market next year, bankers do not see a huge flood. Many potential South Korean IPOs are units of big conglomerates and can afford to wait until their valuations are more attractive.
"We're likely to see a quite selective recovery led by industries moving into upcycle," said Cho Kwang-jae, director of equity capital markets at Woori Investment & Securities.
He added that companies in the technology and chemical sectors are more likely to move ahead before others.
Deals that have been postponed include an estimated $1.3-$1.8 billion offering by SK Lubricants Co and Hyundai Oilbank's some $1 billion share sale. LG Siltron Inc has also had its eye on a $258 million offering while POSCO Specialty Steel Co has previously sought to raise between 392-462 billion won.
Hyundai Rotem earned 78.4 billion won of net profit last year on 3.1 trillion won of revenue.
It has more than a 90 percent market share in South Korean train orders, as well as a record of steady battle tank orders from South Korea's military. It also builds processing lines for factories owned by Hyundai Motor and its affiliate Hyundai Steel Co.
The IPO was 55 times oversubscribed by retail investors, attracting 3.4 trillion won of demand, as investors look for risky assets with higher return potentials amid low interest rates. The Bank of Korea held rates for a fifth straight month in October, keeping its base rate at 2.50 percent.
Hyundai Motor is the firm's biggest shareholder with a 43.4 percent stake, and a Morgan Stanley fund owns 24.8 percent.
Bank of America Merrill Lynch, Deutsche Bank , Daewoo Securities Co Ltd and Woori Investment & Securities Co Ltd were the IPO's global coordinators and joint bookrunners. ($1 = 1060.6500 Korean won) (Reporting by Miyoung Kim; Editing by Richard Pullin and Edwina Gibbs)
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