Encouraging disappointment

28 January 2010 By Wei Gu

XD Electric’s 2 percent fall on its Shanghai debut may not be as bad as RUSAL’s 11 percent dayone dive in Hong Kong. But it’s lousy in Chinese terms. Increased IPO supply and shortterm market jitters may be dampening investors’ exuberance. Hopefully the rationality will last.

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XD Electric closed down 2 percent after its first day of trading on the Shanghai Stock Exchange, making it the first mainland stock to fall below its initial public offering price on its debut in over three years.

Since the electricity equipment maker's shares were priced on Jan. 21, the Shanghai Composite index has fallen 5 percent, with other heavy equipment firms down around 8 percent. About 111 new companies have come to the market in the past six months.

XD Electric was priced at 7.90 yuan, the top of its indicated range. The price valued it at 34 times 2008 earnings, higher than the 27 times for the benchmark index and lower than the 40 times for listed Chinese rivals such as XJ Electric Co Ltd and Shanghai Electric.

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