UPDATE 1-China investors flock to IPO under relaxed rules despite market jitters

* Goaland Energy IPO more than 4,000 times oversubscribed

* New rules allow investors to order without upfront payment

* IPO stocks generally priced at heavy discount to listed peers (Adds China market turmoil, investor comments)

SHANGHAI, Jan 25 (Reuters) - Despite China’s stock market convulsions, investors flocked to the country’s first initial public offering under rules implemented on Jan. 1 that allow investors to submit orders without paying upfront for new stocks at prices set to remain well below those of already listed peers.

While Chinese markets have been in turmoil this month as the economy grapples with its worst performance in 25 years, Guangzhou Goaland Energy Conservation Tech, a producer of coolants for electricity generators, said its up-to-$39 million IPO was oversubscribed more than 4,000 times.

Priced nearly a third cheaper than listed sector rivals, Goaland Energy’s oversubscription rate was about 10 times that of IPOs before the change of rules, analysts said.

Under the new rules, investors no longer need to pre-pay for IPO share orders during the subscription period, leaving them free to place bigger-volume bets without tying up equivalent funds. At the same time, analysts and investors expect an unofficial practice of pricing new IPO shares at a discount to listed peers to continue, almost guaranteeing a debut day ‘pop’.

For investor Zhu Haifeng, a businessman turned full-time stock investor, betting on Goaland Energy was a simple decision because he saw nothing to lose from the investment. “IPO shares will definitely rise to their upward limit debut,” he said, referring to an upper limit of 44 percent on the first day’s trade for a new stock.

Goaland Energy is one of seven IPOs approved by China’s securities regulator last week under the new system.

It priced the 16.67 million shares on offer at 15.52 yuan each for the listing in China’s Nasdaq-style ChiNext board in Shenzhen. Proceeds will be used to expand the company’s core business and supplement working capital, it said in an earlier prospectus.

The price was equivalent to a 33 percent discount to listed peers in electric equipment and machinery manufacturing, Thomson Reuters publication IFR reported. It was also equivalent to a price-to-earnings ratio of 22.97 times, compared with the average of more than 87 times for companies listed on China’s Nasdaq-style ChiNext market in Shenzhen.

“Regulators artificially keep the IPO prices much lower than market valuations,” said investor Zhu. “Only when government control is removed, say, let IPOs priced at 50-60 times earnings, will we witness shares fall below IPO prices on debut.”

$1=6.58 Yuan Additional reporting by Samuel Shen; Writing by Elzio Barreto; Editing by Kenneth Maxwell