Hunan Nonferrous Metals rose 73 percent in its trading debut Friday - the biggest jump for a new listing on Hong Kong's main board in more than two years.The shares closed at HK$2.85 after rising as much as 82 percent to HK$3. Their IPO price was HK$1.65. About 947 million shares changed hands for a total transaction value of HK$2.7 billion.
Retail investors placed orders for 700 times more Hunan Nonferrous shares than were offered. The international portion of the IPO was 75 times oversubscribed, with more than 400 institutional investors participating.
The previous best performance by a new listing on the main board was Zijin Mining's 73 percent gain on December 23, 2003.
Hunan Nonferrous Metals' better- than-expected debut was partly fueled by the fresh price highs achieved in the commodities markets by metals such as copper and zinc.
Zinc headed for its biggest quarterly gain in at least 17 years and touched a new peak of US$2,705 (HK$21,100) per ton Friday. Among other metals, gold is at 25-year highs at more than US$588 an ounce and silver has reached heights not seen in more than 22 years. Copper, too, is headed for its best quarterly gain in two years.
Changsha-based Hunan Nonferrous is China's largest producer of indium, tungsten, antimony and lead.
Other commodity stocks also jumped Friday.
Fujian-based Zijin Mining rose 9 percent to close at HK$6.10, a new high, while its smaller rival Lingbao Gold gained 4 percent to close at HK$5.25. Jiangxi Copper climbed 3percent to HK$6.90.
But at least one fund manager believes investors would do well to take profits on Hunan Nonferrous.
"While I take a positive view of the metals sector and believe commodity prices will remain high given the strong demand, the valuation of Hunan Nonferrous is too demanding," said Liu Yang, who helps manage US$1.8 billion of Asian stocks at Atlantis Investment Management in Hong Kong.
"About 60 percent of Hunan Nonferrous' net profit comes from the smelting business, where profit margins are very thin. Its downstream business is not comparable to the upstream business of Chalco [Aluminum Corp of China] and Zijin, where the profit margins are fatter."
At its closing price of HK$2.85, Hunan Nonferrous trades at 17.8 times forecast 2006 earnings, a 55 percent premium to Jiangxi Copper's 11.5 times price-earnings ratio and a 98 percent premium to Chalco's nine times.
The company raised HK$1.78 billion with its IPO, selling 1.076 billion shares at the top of its indicative range.
