Metallurgical Corp of China (MCC), a building and engineering firm that raised $2.3 billion in Hong Kong's biggest IPO this year, fell on its debut as investors, tiring from an IPO deluge, judged the stock was too pricey given an uncertain outlook for China's steel industry.

Dual-listed MCC's weak debut in Hong Kong and a slide in its Shanghai stock that listed earlier in the week signal a waning investor appetite for overly rich IPO valuations, analysts said.

Shares in MCC, which helped construct Beijing's Bird's Nest Olympic stadium and also builds steel mills, fell 13 percent below their Hong Kong IPO price of HK$6.35 -- the worst market debut in the city this year.

It shows the market is not indiscriminately buying all IPOs, said Nicholas Yeo, head of China and Hong Kong equities at Aberdeen Asset Management.

This is of a less-quality IPO. We feel this company has too many diversified businesses, so it's not as appealing.

MCC's IPO raised combined proceeds of $5.12 billion in Shanghai and Hong Kong, making it the world's second-biggest this year after China State Construction Engineering Corp's $7.3 billion offering in July.

Blame it on investor sentiment. These shares are really overpriced, said Francis Lun, general manager at Fulbright Securities.

They took advantage of the market and priced their shares high, but the outlook for the steel industry is not very good.

In Shanghai, the stock rose 35 percent on Monday, a modest debut by Chinese standards, and the stock was down 5 percent on Thursday -- just 12 percent above the issue price.

Fund managers and brokers said MCC's share performance was an indication that investors would look more critically at IPOs on offer, such as Wynn Resorts' $1.6 billion offering.

This would dampen sentiment for retail investors who think all IPOs are sure wins, said Aberdeen's Yeo. Investors are now cautious about what they are buying.

Asia Pacific IPO deals were worth $22.8 billion, or 64 percent of the global tally for the first 36 weeks of the year, according to data from Thomson Reuters.

China is leading the rush in the region's IPOs, mainly after new rules allowed listings to resume after a 10-month break.

Obviously, these IPOs are overpriced. The Wynn IPO, for example, has valuations that are double that of Galaxy (Entertainment Group Ltd), said Fulbright's Lun.

The IPO bubble's been burst. If you've missed the boat, you're out of luck.

HUGE OVER-CAPACITY

Investors are concerned about MCC's growth prospects given an expected slowdown in investment in a domestic steel industry facing annual over-capacity of more than 100 million tonnes.

MCC's pricing is a bit high at around 22 times projected 2009 earnings and its A-shares keep falling in Shanghai, said Belle Liang, head of research at Core Pacific-Yamaichi International (HK) Ltd.

Fulbright's Lun said a reasonable price-earnings ratio for MCC would be 15-16 times.

MCC's performance paled in comparison to Wednesday's debut by Sinopharm, which jumped as high as 23 percent above its IPO price after the drug distributor raised $1.13 billion.

In July, China's largest building materials maker BBMG Corp soared 65 percent on its debut, and herbal shampoo maker BaWang International gained 35 percent.

The Hang Seng Index .HSI was down 2.5 percent.

MCC, part-owned by leading steelmaker Baosteel, is China's oldest and biggest construction company in the metals industry. Its businesses also include mining, equipment making and real estate development.

The company has said it would use its IPO proceeds to pay for mining rights in Afghanistan, Argentina and Pakistan, and for iron and steel projects in Australia, India, Vietnam and Mongolia. It will also repay bank borrowings and supplement working capital.

MCC's copper mining project in Afghanistan with Jiangxi Copper would start production by the end of 2011, MCC President Shen Heting told a media briefing.

(Additional reporting by Alison Leung; Editing by Valerie Lee)