(Repeats to fix formatting)
SHANGHAI Jan 28 Shares of Shaanxi Coal Industry
Co Ltd jumped in their Shanghai debut but came off
earlier stratospheric highs in a roller coaster day as China's
newly reopened initial public offering market drew out
Shaanxi Coal, which raised $660 million in the biggest
mainland China listing since 2012, had soared by its daily limit
of 44 percent in early trade. That triggered a suspension until
five minutes before the market's close and prompted an
announcement from the exchange that it had taken measures
against two retail investors who had driven the price up
When trade restarted, it plunged to end a comparatively mild
13.8 percent higher at 4.55 yuan. Most of the shares changed at
an average price of 4.69 yuan, data showed, underscoring the
unusual nature of the high of 5.76 yuan earlier in the session.
China's re-opening of its IPO market after a 14 month freeze
has been marked by huge first day "pops" for new issues due to
pent-up demand as well as relatively cheap valuations after
companies, including Shaanxi Coal, priced IPOs low amid
heightened regulatory supervision.
The moratorium had been put in place to carry out reforms
aimed at weeding out speculation and restoring investor
confidence in the stock market.
Helen Lau, a senior analyst at UOB Kay Hian Ltd in Hong
Kong, said that while Shaanxi Coal, China's third-largest listed
coal miner, had better earnings potential than rivals due to
better coal quality and higher production rates, the early 44
percent jump did not reflect fundamentals.
"This hype is overdone, it is too strong," she said.
DEPRESSED COAL MARKET
Shaanxi Coal, a state-owned giant based in China's coal-rich
northern province of the same name, competes with China Shenhua
Energy Co Ltd and China Coal Energy Co Ltd
in a highly fragmented market. Shenhua is the
biggest listed miner but only produced about 10 percent of
mainland coal volumes in 2013.
Shaanxi Coal had cut its IPO target by 60 percent from an
estimate made earlier this year - one of the companies that
appeared to have been affected by the increased oversight.
The China Securities Regulatory Commission said this month
it would increase supervision of IPOs and has begun inspections
of IPO pricing behaviour.
Its IPO was valued at a price to earnings ratio of 6.23
times its 2012 profit on a diluted basis. That compared with an
average of 10.31 times for mining firms listed on the Shanghai
Shaanxi Coal's debut comes as the outlook for China's coal
market remains weak, with the China Coal Association forecasting
growth in supply to outpace demand.
Coal demand has also been hit by slower economic growth and
by Beijing's push to tackle air pollution, which has seen a slew
of major cities introduce plans to curb coal consumption and
substitute that with cleaner fuels, like natural gas.
"In the future, I don't think (Shaanxi Coal's) share price
will fall below the IPO price, but in the long-term, I don't see
any impetus for it to increase as the whole market is pretty
depressed," said a Shanghai-based analyst who declined to be
identified because he is not authorised to speak to the media.
Since the resumption of China IPOs, 36 firms, including
Shaanxi Coal, have listed, with many leaping by the 44 percent
limit on their first day of trade before giving up some of those
Neway Valve Suzhou Co Ltd, the first company to
list since the re-opening, is trading at roughly 21 percent
above its IPO price since listing just under two weeks ago.
BOC International, China Securities, and CICC were the
underwriters for the Shaanxi Coal deal.
($1 = 6.0480 Chinese yuan)
(Reporting by Shanghai Newsroom and Elzio Barreto in Hong Kong;
Editing by Kazunori Takada and Edwina Gibbs)