China railway builder launches $5.4 billion IPO

By Kennix Chim

HONG KONG (Reuters) - China Railway Construction Corp launched a larger-than-expected $5.4 billion IPO that would be the world's biggest this year, despite cutting the number of shares to be listed in Shanghai amid market weakness.

China Railway Construction, which is about the same size as duopoly rival China Railway Group (0390.HK: Quote, Profile, Research, Stock Buzz)(601390.SS: Quote, Profile, Research, Stock Buzz), set the price range above what the market had anticipated for its Hong Kong and Shanghai share sale. The IPO was postponed from January due to poor stock market conditions.

To boost investor confidence, the state-run company tapped nine so-called cornerstone investors including Hong Kong tycoons, two Singapore government funds and Yale University to buy up to $450 million worth of IPO shares ahead of a listing in Shanghai on March 10 and in Hong Kong on March 13.

However, the price range was set at a discount to its main rival, China Railway Group, to attract buyers. The company is expected to benefit from massive spending as China scrambles to build up transport infrastructure whose inadequacies were underscored by recent snowstorms that crippled large parts of the country.

"Though the market is volatile, because of the country's railway bottlenecks and a valuation cheaper than its peers, investors will buy it," said Lawrence Lo, vice president at Lombard Odier Darier Hentsch (Asia) Ltd in Hong Kong.

The firm cut the mainland portion of the issue to 2.45 billion shares from an original plan for 2.8 billion shares.

Beijing is reluctant to flood the market with new shares after the Shanghai composite index .SSEC lost 17 percent this year through Friday. Investor worries about new supply of shares were evident on Monday as Shanghai stocks fell another 4 percent.

Hong Kong stocks .HSI have lost about 16 percent this year.