Qingdao Port shares tumble on debut in HK

Shares of Qingdao Port International Co Ltd, operator of the world's seventh busiest port by shipping volume tumbled in their Hong Kong trading debut on Friday following lukewarm response from investors and concerns that the ongoing metal financing probe would hurt the mainland's third-largest foreign trade port.

Qingdao Port International, the primary operator of the port of Qingdao, in northeast China's Shandong province, saw its shares slide 1.33 percent from their listing price of HK$3.76 per share to close at HK$3.71 per share on the first day of trading at the Hong Kong Stock Exchange.

After a rare fixed price initial public offering, the port operator announced on Thursday that the net proceeds from the global offering was around HK$2.49 billion. According to its prospectus, 90 percent of the funds raised, or HK$2.24 billion, would be used for setting up cargo handling facilities at the Dongjiakou Port Area, a part of the Qingdao Port that will be able to handle 300 million metric tons of cargo every year after completion.

The lukewarm response from retail investors in Hong Kong also contributed to the share price decline. Only 11.89 million shares were grabbed in the local offering, equivalent to approximately 15 percent of the total amount available for subscription. The rest was purchased by international buyers, the company said in an announcement on Thursday. A total of 776.38 million shares were on offer initially.

"People are obviously concerned over the ongoing metal financing probe at Qingdao Port," said Stuwart Chen, an analyst with the Hong Kong-based Sun Hung Kai Financial Institutional Research.

"At this moment we see no fundamental impact from the investigation, but as very little is known to the outsiders, it's hard to estimate the scale of the wrongdoing. Given that liquidity remains tight on the mainland, there could be more than one company fooling banks in the same way."

On Wednesday, Reuters reported that Qingdao Port was conducting an investigation about whether copper, aluminum and iron ore piled up in its warehouses were used as collateral several times to obtain financing from various lenders. The port is said to have stopped export of such cargo.

On Thursday, the 21st Century Business Herald, a Chinese language newspaper, quoted insiders close to the matter as saying that the investigation focused on Decheng Mining, a Qingdao-based private bauxite importer.

The cargo involved was 100,000 tons of aluminum oxide and about 3,000 tons of copper. Four banks, including Standard Chartered Plc, were said to be involved and the lenders collectively had an exposure of over 1 billion yuan ($162 million), the report said.

Qingdao Port, however, said its operations have not been hampered by the ongoing investigation.

"Everything is running normally," the operator's chairman, Zheng Minghui, stressed during the company's listing ceremony on Friday. Zheng declined further comment on the issue.

"The investigation is not a big deal to the port," said Kenny Tang, general manager of the securities and asset management business at AMTD Financial Planning Ltd, a subsidiary of the Hong Kong-based Cheung Kong Group. "Investors are not keen on the shares as the overall outlook for commodities is not that optimistic.

As the GDP growth rate in China slows down and the country invests less in infrastructure but more on innovation, the demand for commodities such as iron ore is likely to remain subdued." However, Qingdao Port's business will remain stable in the long term due to the soft landing of the economy, Tang said.