Metallurgical Corp of China (MCC) priced the Hong Kong portion of its initial public offering at the lower end of an indicated range, sources said on Thursday, as the IPO's size and sector appeared to have dampened demand for the construction and engineering company.
Still, MCC managed to raise $2.34 billion in Hong Kong's biggest IPO so far this year, after raising slightly more than that in Shanghai last week for a total of $5.12 billion in proceeds.
The dual-listed stock is the second-largest IPO in the world this year, behind China State Construction Engineering Corp's $7.3 billion offering.
MCC's final price means Hong Kong's market has raised $3.47 billion in the last 24 hours alone, with China's Sinopharm pricing its H-share IPO late yesterday.
MCC sold 2.87 billion Hong Kong shares at HK$6.35 per share, versus a previously indicated range of HK$6.16 to HK$6.81, said the sources.
Partly due to its large fund-raising size, it's difficult to have impressive oversubscription, said Li Kwok-suen, a fund manager at Phillip Capital Management. Also investors might rather pick Sinopharm, as Sinopharm has more attractive selling points.
He said Sinopharm, China's largest pharmaceutical products distributor, appeared to have better prospects, given the medical sector's fast growth in China. MCC's construction and engineering sector has grappled with lower margins as the property market is rebounding but not at boom levels seen two years ago.
MCC sold 3.5 billion shares last week in Shanghai at the top end of an indicated range, raising 18.97 billion yuan ($2.78 billion), although the range been lowered during the road show, according to people familiar with the matter.
The China Securities Regulatory Commission lifted a 10-month ban on new IPOs in July, ending a prohibition aimed at propping up the country's two stock markets amid the global financial crisis.
China's main Shanghai bourse came roaring back this year, rising 87 percent between January and the end of July, but then slumped 21.8 percent in August, its second-biggest monthly loss in 15 years, fuelling speculation the regulator could either halt or slow down the number of new offerings in coming months.
Investor concern over a surge in equity supply and fears of lending curbs hit the benchmark Shanghai Composite Index .SSEC last month, though the market has stabilized lately, in part from government reassurance it will not tighten monetary policies.
MCC has secured five cornerstone investors, each investing $50 million. These include Citic Pacific, BOC Hong Kong, China Overseas Land, China Communications Construction and CCB International, according to a term sheet.
The company will use the proceeds to pay for mining rights in Afghanistan, Argentina and Pakistan, and to fund iron and steel mine projects in Australia, India, Vietnam and Mongolia.
Proceeds will also be used to repay bank borrowings and fund potential acquisitions of overseas mineral resources.
Morgan Stanley, Citigroup, CICC and CITIC International are the book runners of the deal. (Additional reporting by Carolyn Qu; Editing by Chris Lewis and Valerie Lee)