China COSCO stock falls on first trading day
Shares in China COSCO Holdings Ltd., parent company of COSCO Container Lines, closed at HK$3.825 (49 cents) at a 10 percent discount below the initial public offering price of HK$4.25 (55 cents) during the first day of trading on the Hong Kong stock market Thursday.
The IPO share price was already set at the lower end of a proposed price range of HK$4.25 to HK$5.75.
Shares in China COSCO Holdings even declined 13 percent at one point in intra-day trading on the Hong Kong stock exchange.
However, Wei Jiafu, chairman of China COSCO and head of its parent company, Beijing-based COSCO, said he was not disappointed by the initial performance of the shares on the stock market.
“Investment is for the long-term, and investors will have a better understanding of the company after they see our interim results,” Reuters reported Wei as saying.
Charles de Trenck, analyst with CitiBank in Hong Kong, said the stock's poor performance on its inaugural day was due to the retail subscription being undersubcribed, many investors believe the cycle has peaked, and the company has a holding company structure. “Holding companies usually command a discount to direct assets,” he explained.
China COSCO Holdings raised about $1.2 billion through the IPO, which transferred about 37 percent of the shares in the company to private investors. The COSCO group remains a majority stockholder.
At current share prices, China COSCO has a market capitalization of about $2.9 billion, of which the public float is worth about $1.1 billion. This puts China COSCO’s market value above that of its smaller Chinese competitor China Shipping Container Lines ($2.6 billion) and at a comparable level to Orient Overseas International Ltd. ($2.7 billion) and “K” Line ($3 billion).
A new entity created by the state-owned COSCO group, China COSCO Holdings owns 100 percent of COSCO Container Lines and 52 percent of the port and container leasing company COSCO Pacific. In turn, COSCO Pacific has a 49 percent stake in COSCO Logistics.