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Battered HK market still favours techs

HONG KONG: Telecommunications and technology companies are still investors' favourites when it comes to initial public offerings, but investors are likely to be more selective after the recent shake-out.

Four of the five stocks listed in the last two weeks closed below their issue prices. Prosten Technology Holdings Ltd, listed on March 28, suffered the worst fall, down 53 percent from its issue price to close at HK$2.10 on Friday.

Shares of PetroChina Co Ltd, China's largest oil producer, ended their first trading day in Hong Kong on Friday at HK$1.21, or 4.7 percent below the issue price of HK$1.27.

"The man on the street doesn't care for these big non-high-tech, commodity-related issues," said a trader at an Asian brokerage house on Friday.

However, TV maker Skyworth Digital Holdings Ltd ended its debut on Friday 37 percent higher at HK$2.85 compared with an issue price of HK$2.07.

"Obviously Skyworth, which makes digital TVs and set-top boxes, is part of the new economy and PetroChina belongs to the old economy," said Herbert Lau, associate director of research at Celestial Asia Securities.

The fervour for technology stocks has cooled a bit but the sector was still new and attractive, though investors would be more selective, said Frederick Tsang, research director at China Everbright Group.

"Most of these companies are in their early stages of development, and investors will be more sensitive and would take a look at their business plans, whether they work or not, before taking up the stocks," he said.

Analysts said the disappointing performance of PetroChina could pose a problem for other Chinese enterprises such as oil firm CNOOC Ltd, which called off its listing plan last October, and steel and iron firm Baoshan Iron and Steel Co.

Investec Guinness Flight, which has US$600 million under management in Hong Kong, did not invest in PetroChina and remains wary of upcoming IPOs from other Chinese enterprises, fund manager Edmund Harris said.

"These new issues need to be more attractive to investors, particularly at a time when returns from telecoms and technology stocks are strong and there is good value in quality red chips and H shares for "old economy" investors, Harris said.

But upstart cellular provider China Unicom would be an exception, analysts said.

"Unicom would get a strong response because of the nature of its business. Without the telecom concept, it wouldn't receive a very good response," said Alex Wong, head of research at OSK Asia Securities.

China Unicom is China's second biggest telecommunications firm after China Telecom, the ultimate parent of China Telecom (Hong Kong) Ltd.

Baoshan Iron and Steel was expected to seek a dual listing in Hong Kong and New York in the first half of this year. China Unicom would seek the same dual listing, probably in May or June. -Reuters