* Slump could pressure PICC Group debut on Friday
* Shares tumble nearly 9 pct in HK debut
* Outlook for coal-related companies not so rosy
* Citic Sec, Deutsche, UBS bought $37 mln of unsold stock
(Adds outlook for company, details)
By Elzio Barreto
HONG KONG, Dec 5 Shares in Zhengzhou Coal Mining
Machinery slid in their first day of Hong Kong trade
after underwriters of the $300 million offering were stuck in
the rare position of holding unsold stock, underscoring poor
demand that bodes ill for Chinese insurer PICC's bigger debut on
Tumbling coal prices have made it a particularly
inauspicious time for coal-related firms to come to market, but
it has also been a bad season for many listings in the region,
with investors spooked by China's economic slowdown, Europe's
debt crisis and the underperformance of several IPOs last year.
New stock offerings in Hong Kong have dwindled and volumes
are down by about 63 percent so far this year, according to
Thomson Reuters data, a shocking reversal for the city which had
been world's top IPO destination in 2009 and 2010.
Shares in Zhengzhou Coal Mining Machinery Group Co Ltd,
which is also listed in Shanghai, dropped to
HK$9.47, down almost 9 percent from their listing price of
That in turn had been the bottom of its indicative range of
HK$10.38 to HK$12.28.
The benchmark Hang Seng index climbed 1.5 percent.
The $37.2 million in unsold stock is not subject to any
lock-up conditions and could hang over the company's Hong Kong
share price for some time.
In Shanghai, the company's stock gained 5.4 percent but is
still down about 28 percent for the year to date,
underperforming a 10 percent decline in the Shanghai Composite
Like Zhengzhou Coal, state-owned PICC Group priced
its offering near the bottom of the indicative range. PICC's
underwriters also ended up revising down the company's valuation
and IPO size, raising a less-than-hoped-for $3.1 billion.
Companies including Zhengzhou Coal and PICC Group have
increasingly relied on funds from so-called cornerstone
investors to get their deals done. Cornerstones back many Asian
listings, committing to buy large, guaranteed stakes and
agreeing to a lock-up period during which they will not sell
PICC Group had more than half of its IPO covered by
cornerstone orders, including a $500 million investment from
U.S. insurer American International Group (AIG).
Zhengzhou Coal secured $120 million in pledges from investors
including asset manager Shikumen Capital and coal producer Inner
Mongolia Yitai Group Co Ltd < 900948.SS>.
COAL PRICE PAIN
Coal prices have declined by a fifth so far this year,
likely prompting miners to slow or delay expansion plans,
reducing demand for new machinery produced by Zhengzhou Coal and
"If the market is so bad, why would (coal companies) spend
money on capex? They can just delay those investments," said
Shirley Zhao, a coal industry analyst at Mirae Asset Securities
in Hong Kong.
She said that Mirae now only expects 6 percent growth in
China coal consumption and production? after five years of
double digit growth.
Zhengzhou Coal, which counts China Shenhua Energy Co Ltd
, the country's largest coal producer, as a
key client, gets nearly 69 percent of its sales from hydraulic
roof supports used to prevent rocks from falling into a coal
mine's working area. Some 23 percent of revenue comes from its
steel and raw materials trading business.
Profits in the six months ended June totalled 832.3 million
yuan on sales of 4.72 billion yuan.
Demand from institutional and retail investors fell short of
the number of shares offered, prompting three of Zhengzhou
Coal's four underwriters to buy the unsold shares.
Citic Securities Corporate Finance bought 22.4 million
shares, while Deutsche Bank took up 710,000 shares
and UBS AG another 4.65 million shares.
JPMorgan was also an underwriter for the offering.
($1 = 7.7500 Hong Kong dollars)
($1 = 6.2256 Chinese yuan)
(Reporting by Elzio Barreto; Editing by Edwina Gibbs)