| HONG KONG
HONG KONG Shares in Alibaba.com 1688.HK
nearly tripled on their trading debut on Tuesday, beating all
expectations, after China's largest e-commerce firm raised
$1.49 billion in Hong Kong's most popular initial public
The stirring debut reflects voracious appetite for
China-related stocks, as investors, many of whom received far
fewer IPO shares than they wanted, shrugged off the Hong Kong
market's sharp drop on Monday and what several observers
consider to be a sky-high valuation to buy Alibaba.com shares.
"I'm not convinced," said Andrew Clarke, a trader at
Societe Generale Securities in Hong Kong. "It's massively
overpriced. I'd rather go buy Exxon (XOM.N) at 15 times
Shares in Alibaba.com, in which Internet giant Yahoo Inc
(YHOO.O) is a key investor, traded as high as HK$39.95,
compared with an IPO price of HK$13.50, which was at the top of
an indicated range after the company's share sale drew record
demand from Hong Kong retail investors.
The stock rose steadily through the day despite a
see-sawing broader market and closed at HK$39.50 for a gain of
nearly 193 percent, valuing Alibaba.com at roughly US$25.6
billion and ranking it fifth among global Internet firms and
top in Asia outside Japan.
Trading in Hong Kong was so frenetic that the Stock
Exchange took calls from brokers asking whether there were
slowdowns in the order-placing system.
"It's helped by the recent strength of tech stocks in the
U.S.," said Louis Wong, research director at Phillip
"Baidu (BIDU.O) has risen above $400 and Google (GOOG.O)
has held well above $700," he said, referring to the Chinese
and U.S.-based Internet search firms, respectively.
With more than 162 million Web users, China is the world's
second-largest Internet market after the United States.
"Because China is such a large, fragmented economy, the
Internet is an attractive tool," said Robert James Horrocks,
head of research at Mirae Asset Global Investments in Hong
Alibaba.com, an online business-to-business site connecting
companies looking to import and export Chinese goods, was
founded in 1999 as a bulletin board for businesses to post
trade leads. The company says that at end-June its online
marketplaces had more than 24 million members.
The Hang Seng Index .HSI ended 1.7 percent higher after
dropping 5 percent on Monday in its sharpest one-day fall since
September 2001, which had led many observers to lower their
expectations for Alibaba.com's trading debut.
Investors clamored for Alibaba.com shares even though its
IPO price valued the company at more than 106 times forecast
2007 earnings -- a premium to most of its peers -- and its
Tuesday performance lifted its valuation to a stratospheric 316
"For global funds, it's the only type of e-commerce service
sector stock in the region. For e-commerce, it's the Asian
proxy," said Andrew Sullivan, sales trading director at Daiwa
By comparison, Baidu.com Inc trades at 170 times 2007
forecast earnings, while Google Inc is at 46 times and eBay Inc
(EBAY.O) at 23.5 times. Trade media company Global Sources Ltd
(GSOL.O) trades at 47 times, while Hong Kong-listed Tencent
Holdings Ltd (0700.HK) trades at 77 times prospective earnings.
"The price set is reasonable. I said it two weeks ago, and
today's performance has proven me right," said Alibaba.com
Chairman Jack Ma, who founded the company in the eastern city
of Hangzhou and is one of China's highest-profile
Money has poured into Chinese companies listed in Hong
Kong, partly on expectations that investors in mainland China,
where stocks are among the world's most expensive, will
eventually be able to buy stocks listed in Hong Kong.
On Monday, PetroChina (601857.SS) shares more than doubled
on their debut in Shanghai, making China's top oil producer by
far the world's biggest listed company by market value at
around $1 trillion.
The HSCE Index .HSCE of Chinese stocks traded in Hong
Kong was up nearly 79 percent in 2007 through Tuesday, while
the Shanghai benchmark .SSEC has more than doubled.
Alibaba.com sold 858.9 million IPO shares, or 17 percent of
its enlarged share capital, in a deal handled by Deutsche Bank
(DBKGn.DE), Goldman Sachs (GS.N) and Morgan Stanley (MS.N).
The company generated orders worth HK$447.5 billion
(US$57.4 billion) from Hong Kong retail investors alone, making
it the most popular IPO in the city, beating share sales by
Industrial and Commercial Bank of China (1398.HK) (601398.SS)
and Belle International (1880.HK).
Yahoo holds a 1.2 percent stake in Alibaba.com, as well as
a 39 percent stake in Alibaba.com's parent firm, which holds 75
percent of the listing company.
Other investors in the IPO included Cisco Systems (CSCO.O)
and Taiwan's Hon Hai Precision Industry Co (2317.TW). The high
level of oversubscription means many investors were
disappointed with their share allocations.
(Additional reporting by Rita Chang & Vinicy Chan; Editing
by Ian Geoghegan)