Chinese companies are in a rush to tap buoyant stock markets in the mainland and Hong Kong, which account for six of the 10 largest global IPOs so far this year, to raise cash after banks were told to cool a lending binge in the first half of the year.
Shanghai alone saw a resurgence of major IPOs in recent weeks, with XD Electric, Huatai Securities and train maker China CNR Corp getting the regulatory green light for offerings aiming to raise up to $1 billion or more.
The listings fever has spread, and debt-laden Russian aluminum giant UC RUSAL is likely to start a roadshow next month for its $2 billion Hong Kong share listing - if it wins approval from the Hong Kong Stock Exchange, a newspaper said on Wednesday.
China Shipbuilding managed only a relatively lukewarm gain of nearly 15 percent by mid-afternoon. Chinese IPOs typically make impressive debuts, with first-day share price surges averaging 62 percent this year.
The stock opened at 8.41 yuan and was last quoted at 8.31 yuan, compared with an initial public offering price of 7.38 yuan.
Three analysts surveyed by Reuters had expected the shares to trade between 8.6 yuan and 10.3 yuan on their first day.
Investors are becoming more cautious and are reluctant to push up prices too high on the first day of trading as they tended to do previously, said Chen Jinren, an analyst with Huatai Securities. That's exactly what the government wanted to see.
For a Graphic on 2009 Top-10 global IPO debuts, click: here
Analysts see the flurry of new listings as part of a broader government drive to prevent price bubbles in the property and share markets, with the key Shanghai Composite Index .SSEC up about 80 percent this year amid enthusiasm about the economic recovery and as a bank lending boom fed market liquidity.
China Merchants Securities' listing in November managed only a modest gain of 13 percent when it debuted and this week became the first of this year's crop of new stocks to close below its IPO price.
The government has started to use a more market-oriented approach to tackle speculative bets on new shares. I don't think they will stop doing so just because of a modest performance by a couple of IPOs, said Chen.
The $3.1 billion IPO of China Pacific Insurance, the country's third-largest life insurer and partly owned by Carlyle Group CYL.UL, was the world's seventh largest IPO of the year.
China Shipbuilding's IPO, the mainland's third-largest this year, comes as the shipping sector is mired in a second year of a downturn due to tight credit markets and a slow recovery in global trade.
Investors face risks in the longer term as the global economic recovery is still fragile, and I don't expect to see a full recovery in the shipping industry over the next 2-3 years, said Zhen Yi, analyst at China Securities Co.
Fair value for China Shipbuilding's shares is between 6.6 yuan and 8 yuan, she added.
Haitong Securities estimates the company's profit growth this year may slow to 22 percent and drop further to 9 percent in 2010, from an average 63.5 percent annual rise from 2006 to 2008.
But China Shipbuilding's IPO was 400 times subscribed after it priced its shares at 35 times 2009 earnings.
That compares with an average price/earnings ratio of about 17 for domestic rivals Guangzhou Shipyard and China State Shipbuilding and 4.3 for Korean shipbuilders such as Hyundai Heavy Industries.
China Shipbuilding, controlled by state-owned China Shipbuilding Industry Group, said it would use the IPO proceeds to expand production capacity and supplement working capital.
Analysts also blame China Shipbuilding's weak debut in part on companies rushing to get listings in before the end of the year and expect a better reception for new listings next year.
Many companies are in a rush to go public before the end of the year which leads to liquidity pressure. I think the situation will improve next year, said Zhang Qi, an analyst with Haitong Securities.
(Additional reporting by Samuel Shen; Editing by Edmund Klamann and Valerie Lee)