Hong Kong-listed Huadian Power International Corporation Ltd staged an unexpected rally on its debut in the A-share market Thursday.

The stock, the first initial public offering (IPO) in the mainland in five months, surged 78.97 percent yesterday to close at 4.51 yuan (54 US cents).

That compared to an IPO price of 2.52 yuan (30 US cents) and an intraday high of 5.35 yuan (64 US cents). It was also the top gainer in Shanghai yesterday.

Huadian Power's H-share price closed unchanged at HK$2.35 (30 US cents) yesterday, despite early highs.

Analysts were surprised by the performance of Huadian Power on its first day of trading.

"We estimated Huadian's A-share debut at around 3 yuan. So its close of 4.51 yuan certainly came as a surprise," said Xiao Hanping, an analyst with China Galaxy Securities Co.

That price level pointed to a price/earnings ratio of 34 times, which is obviously rather high, he said.

The stock was chased by institutional investors and speculators, he added.

It is hard to tell whether the company will be able to sustain that level, and the room for a further rally is very limited, said Yin Yifeng, an analyst with China Securities Co.

Huadian's robust debut, however, did not drag up the overall power counter yesterday or the benchmark Shanghai composite index, which edged down 0.81 percent to finish at 1,242.307.

Huadian Power, based in East China's Shandong Province, is the listed flagship of China Huadian Group Corp. It has 12 subsidiary power generation companies.

It kicked off the 765 million A-share IPO on January 17 and planned to use the proceeds to finance its expansion, which will involve around 2 billion yuan (US$241.5 million) and is expected to expand the company's generating capacity by 50 percent, or 3,860 megawatts, by 2008, company sources said.

Huadian's was also the first A share to test the new IPO pricing system promoted by mainland regulators. The system, aimed to ensure more rational IPO prices, requires companies launching IPOs to seek pricing advice from registered institutional investors.

(China Daily February 4, 2005)