Sinohydro shines in stock market debut

SHARES in Sinohydro Group, China's biggest dam builder, surged as much as 38 percent in their Shanghai debut, triggering a temporary suspension because of "abnormal" trading.

The sharp rise reflected investors' confidence that the company will benefit from China's push for more hydropower facilities, but a high turnover rate yesterday also indicated the price gain may not be sustainable.

Sinohydro rose to 6.23 yuan from its IPO price of 4.5 yuan at 10:56am, before it was temporarily suspended by the Shanghai Stock Exchange for 30 minutes because of "abnormal" trading.

The stock rose 17.11 percent to close at 5.27 yuan, with 93.96 percent of shares changing hands. This performance was in stark contrast to the Shanghai Composite Index that fell 2.33 percent.

"The high turnover rate means the buying was largely arranged to support the share performance," Huatai Securities strategist Chen Huiqin said. "Probably Sinohydro would tumble by the 10 percent daily limit tomorrow."

She also said Sinohydro's strong debut may hurt the market.

"This could send a message to the stock regulators that the market is capable of digesting large IPOs, and then more big IPOs would come," which could drain liquidity out of existing stocks, she said.

Sinohydro, builder of the Three Gorges Dam, raised US$2.1 billion in the share sale, the largest IPO this year on China's mainland. Other confirmed major IPOs in the pipeline include Shaanxi Coal Industry and China Communications Construction.

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