By Hui Ching-hoo (China Daily)
Updated: 2007-11-29 10:45

Shares in the mainland's largest truck manufacturer Sinotruk fell 16 percent in its Hong Kong trading debut yesterday, the worst first-day performance this year.

Its shares tumbled 8.39 percent as soon as the market opened and continued to slide in afternoon trade, ending the day at HK$10.86 - 16 percent lower than its initial public offering (IPO) price of HK$12.88.

A total of 286 million Sinotruk shares changed hands with a transaction value of HK$3.26 billion.

The luckluster performance came despite strong interest in the stock during its IPO period, when its retail tranche was 310 times oversubscribed.

It followed a sluggish trading debut by Sinotrans Shipping last Friday, when its shares tumbled 13 percent.

Sinotruk Chairman Ma Chunji attributed the drop to bleak market sentiment.

"(But) we are confident about the company's outlook given our size and market demand," he said.

Ricky Cheung, vice-president of Enlighten Securities and Futures, said Sinotruk's poor debut was due to a reversal in market sentiment.

"Investors have become more cautious about wagering their money on IPOs after the tepid response to Sinotrans Shipping's listing," said Cheung. "In addition, the shares were priced pretty aggressively, and that drove investors to seek alternatives in the secondary market."

He warned that upcoming IPOs, including that of heavyweight China Railway, would be overshadowed by the bearish sentiment.

"Newcomers should rethink their pricing the market is different (now)," he said.

Most IPOs have been priced at the top of the proposed range in recent months and some have been raised on strong demand.

Hong Kong shares are undergoing a correction due to the rapid increase of the benchmark Hang Seng Index since August.

The index ended 0.59 percent up to close at 27371.24 points, 14 percent lower than its record high on October 30.

Sinotruk sold 702 million new shares at HK$12.88 apiece in a bid to raise HK$9 billion. The proceeds will be used to build new plants and develop new technology to boost production capacity in commercial vehicles.

Weichai Power, another Hong Kong-listed heavy truck maker, withstood its counterpart's poor debut. Its shares edged up 0.28 percent yesterday to close at HK$52.3.