China Construction Co.'s IPO Rocks Market

In this Sept. 26, 2006 file photo, a guard stands in front of the construction site of the National Aquatics Center, also known as the Water Cube, the venue for swimming competition at the 2008 Olympic Games in Beijing.
AP Photo/File
Shares in the company that built the "Water Cube" swimming center for the Beijing Olympics soared Wednesday as trading began after it raised $7.3 billion in the world's biggest initial public offering since March 2008.

China State Construction Engineering Corp. ended the day up 56.2 percent on the Shanghai Stock Exchange after jumping 80 percent in early going.

Investor enthusiasm for State Construction reflected a rebound in China's financial markets after a steep plunge last year. The benchmark Shanghai index is up nearly 89 percent this year, driven in part by heavy government stimulus spending that's intended to insulate China from the global recession.

Despite the jump in State Construction's price, investors were acting more cautiously than they did with major Chinese IPOs in previous years, which soared and quickly plunged, said Wen Lijun, an analyst for Nanjing Securities.

"Investors today actually were very rational amid this overall market rally," she said. "The shadow of the slump of the Chinese markets in 2008 is still clearly remembered."

Wen said she estimated the fair value of State Construction at 5 yuan (72 cents) per share, below its closing price of 6.53 yuan (95 cents).

State Construction was among China's first IPOs after regulators lifted a moratorium on new issues imposed last September due to falling prices.

"A lot of investors would like to play a short term speculative bid on the IPO," Prof. Huang Ming of Cornell University and the Cheung Kong Graduate School of Business told CBS News correspondent Celia Hatton. "They actually flip 70% turnover in one day on that IPO."

Shanghai's first new IPO, Sichuan Expressway Co., soared 323 percent after its debut Monday before falling back to end the day up 203 percent. At midday Wednesday, it was down 42 percent from its peak but still up 110 percent from its IPO price.

State Construction is China's biggest builder of housing and also is known for such showcase projects as the futuristic state TV headquarters and China's tallest skyscraper, the 1,614-foot-tall (492-meter-tall) Shanghai World Financial Center.

Its IPO was the biggest since Visa's $19.7 billion offering in March 2008, according to financial data firm Dealogic. It is China's biggest since PetroChina Ltd. in October 2007 and the country's fourth-largest to date.