Top Biz News

Market rebounds, but sentiment remains weak

By Zhang Ran (China Daily)
Updated: 2006-08-09 08:49

"Air China's share price is set too high, especially in a time when a slew of new IPOs have given investors many choices. The securities regulator should consider easing the steps for new IPOs as there have been too many new IPOs in the market in the past months," a chief investment officer with a joint venture fund management company said.

The shares are being offered at a price that is about twice as high, relative to earnings, as its 2004 offer in Hong Kong.

Despite the market rebound, analysts believed Air China would encounter a frosty start to its first trading day in Shanghai, similar to Daqin Railway Co Ltd.

The recently listed company's shares saw an 11.52 per cent increase on their IPO debut price much lower than that of the Bank of China, which soared 23.06 per cent.

"Air China will not enjoy a warm welcome, because the performance of airline companies has been even worse than that of the rail enterprises," said Wei Daoke, an analyst with Shenyin Wanguo Securities.

Losses at China's 14 airlines widened 23 per cent to 430 million yuan (US$53.8 million) in the second quarter because of government restrictions on fare increases, new routes and fuel hedging.

Comparatively, the new blue chip IPOs expected in the following months, such as the Industrial and Commercial Bank of China, China Mobile and PetroChina, are much more attractive than airline shares.

Weakest period ahead

Yesterday's rebound would not, however, boost the market in the third quarter as overall sentiment remains weak, according to analysts.