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The public offering of Semiconductor Manufacturing International Corp (SMIC), the biggest of its kind on the Chinese mainland, made a weak debut in Hong Kong Thursday, but company executives and analysts believe it won't reduce its attractiveness for market players.
Shanghai-based SMIC's stocks on the Hong Kong Stock Exchange fell 8 percent from its initial public offering (IPO) price of HK$2.69 (34 US cents) on the first day of trading to HK$2.47 (32 US cents).
Its American depository shares (ADSs) on the New York Stock Exchange also shed 11 percent on Wednesday, from its IPO price to US$15.50.
The turnover of its stocks closed at HK$2.42 billion (US$310 million), the second most active in the market.
SMIC raised US$1.8 billion during flotation, the third-largest IPO this year.
SMIC Chairman, President and CEO Richard Chang said that stock prices are based on the market environment, the mentality of international investors and company performance. He added that the only thing he could control is company performance.
Louis Chan, an analyst with Hong Kong-based East Asia Securities, said the fall of SMIC's stock prices was mainly due to market sentiment.
"Some sellers were panicked by the overnight fall in the United States," he said.
He believes the fall on the New York Stock Exchange was related to a change of attitude on the part of US investors concerning China concept stocks.
In the past two weeks, two Internet stocks from China have also suffered from poor market performance on the NASDAQ.
"This (the fall of Linktone and Tom Online's shares) has basically poisoned the Chinese IPO market," said David Menlow, president of IPOfinancial.com, as quoted by Reuters. "I can't believe the markets will be receptive to the next (Chinese) deal."
Chan did not agree that the market performance of SMIC stocks was based on a previous statement by Jenny Wang, the company's chief financial officer.
Wang said SMIC has sufficient capital for 2004 and 2005 and the lawsuit filed against the company by industrial giant Taiwan Semiconductor Manufacturing Corp was groundless.
Some analysts have raised some doubts about the statements, which are contradictory to the company's prospectus.
SMIC made an announcement on Tuesday, saying that Wang's comments were "inaccurate."
Despite a poor market performance on the first day, company executives and industrial analysts believe the prospects for China's semiconductor industry look good in the long run.
Chang said Thursday that the semiconductor market in the Chinese mainland is still on the rise.
"We are still holding it (SMIC stocks) and will in the near future," Louis Chan said.
According to US-based market research firm Gartner Inc, the semiconductor market in the Chinese mainland and Hong Kong will grow at least 30 percent this year, and forecasted that sales will reach US$34.8 billion.
The company predicted the country's consumption of semiconductors will expand at an average annual rate of 18.6 percent from 2002 to 2007 and amount to US$5.4 billion by then.
CCID Consulting, a domestic research firm, said last month that the sales of chips on the Chinese mainland exceeded 200 billion yuan (US$24.10 billion) for the first time in the industry's history with growth of 41 percent last year.
Liu Junguo, a senior analyst with CCID Consulting, believed the strong demand from consumer electronics will be a strong growth engine, which will continue to attract foreign players.
"The rise of Chinese manufacturers like SMIC has also promoted many multinationals to come to China to serve their customers," he said.
(China Daily March 19, 2004)
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