In line with skyrocketing gold prices hitting a 25-year high, Lingbao Gold, the nation's second-largest gold miner, leapt more than 50 percent in its debut.

 

The strong profit-taking, however, forced the shares to finish the day at HK$4.426 (56.6 US cents), with a 32.88 percent gain over the offer price of HK$3.33 (42.7 US cents) per share. A total of 198.69 million shares were traded for a final lump of HK$950.2 million (US$122 million) at HK$4.40-5.00 (56-64 US cents) per share.

 

Retail investors instantly reaped a profit of HK$3,340 (US$428) per lot had they sold the shares at its height of HK$5 (64 US cents) apiece with a HK$6,660 (US$854) subscription amount.

 

The bullish market sentiment over the yellow metal prompted the Henan-based company over-subscription by 730 times in the retail tranche, triggering the claw-back mechanism to set aside the proportion of public offering to 50 percent of all shares for global offering.

 

According to the offering results, those who applied for one lot of Lingbao Gold shares (2,000 shares) only had a 20 percent chance of successful allotment, and the subscribers had to apply for 300,000 shares to be allotted at least one lot.

 

The surge may rekindle the Initial public offerings (IPOs) frenzy, prompted by the world's largest Real Estate Investment Trust (the Link REIT) in its first trading day last year, followed by Chinese mainland enterprises such as Parkson department store, Dongfeng motor group, Zhongshan-based Agile property holding and the nation's first real estate investment trust Guangzhou REIT.

 

The leap of Lingbao Gold comes as no surprise to the market, as the growth momentum of shares is powered by soaring gold prices hovering at their highest in 25 years, at US$548 per ounce from US$256 in April, 2001.

 

Riding on the back of the worldwide demand for the bullion, the nation's largest gold miner, Zijin Mining Group, enjoyed a 250 percent gain over the past half year and investors expect Lingbao gold would follow suit after its debut.

 

"The gold price is set to hit US$600 per ounce in February, and it is very likely to reach US$850 at the end of the year," said Alvin Ching, president of the Chinese Gold and Silver Society in Hong Kong.

 

"With more private investors especially from the increasingly affluent India and the Chinese mainland, as well as central banks, to put money in gold to hedge against the possible slump of the US dollar as a result of its mounting twin deficit, gold prices have more upside potential," added Ching.

 

A number of forces are driving gold prices higher, according to a gold report published by Hang Seng Bank last month. Strong end-user demand has been particularly important.

 

Consumption demand for jewellery, which accounts for 73 percent of total demand for the metal, rose 12 percent in tonnage terms and 20 percent in dollar terms during the first three quarters of 2005, compared with the same period in 2004.

 

Investment demand for gold was also high. Central banks have long considered the metal a safe haven against geopolitical and other risks to diversify asset portfolios from stocks and bonds, as well as an alternative investment tool to hedge against worldwide inflation and soaring oil prices.

 

(China Daily January 13, 2006)