China's Renhe Commercial Holdings Co made a flat trading debut in Hong Kong on Wednesday in an initial public offer (IPO) that is unlikely to inspire other listing hopefuls to venture into a global market, which has been all but closed to newcomers.

Renhe, which develops underground shopping malls, raised $435 million, though its IPO was undersubscribed even after the company cut its offering price, forcing existing shareholders to make up the difference.

Numerous companies have shelved plans to raise billions of dollars by going public, and little improvement is expected anytime soon. Investors shun at the risk these days, and companies that want to list would be forced to accept rock-bottom valuations in order to get their deals done.

"The general market has to improve worldwide, but that is a tall order," said Francis Lun, general manager of Fulbright Securities in Hong Kong.

Renhe's listing is just the third to be completed since late July in the once-thriving Hong Kong market. As of last week in the United States, no company has gone public since early August - the longest stretch since records started being kept in 1980, according to Thomson Reuters data.

With debt financing expensive and hard to come by amid the global credit crunch, capital-hungry companies face dwindling financing options. In Asia, several small firms have defaulted on debt or gone into liquidation in recent weeks.

"Company stocks are falling a lot, which is making it difficult for their major shareholders to borrow money from banks using their stocks as collateral," said Alex Huang, vice president of Mega International Securities in Taipei, which this week saw its first IPO since July 10.

"We'll have to wait for the stock market to pick up to see an improvement in IPOs, probably not before the second quarter of next year," he said.

Renhe sold 3 billion shares, or 15 percent of its share capital, at HK$1.13 each, lower than its earlier target price range of HK$1.40-HK$1.71. The IPO price values Renhe at 10.4 times forecast earnings.

The stock opened at HK$1.10 and rose as high as HK$1.17 before easing back to its offering price in a debut that was delayed by a week. The benchmark Hang Seng Index ended the morning session down nearly 3 percent, taking its year-to-date losses to about 47 percent.

Of the 300 million IPO shares allocated to Hong Kong retail investors, or 10 percent of the overall total, Renhe received applications for fewer than 19.9 million shares, or 6.6 percent of the shares available to local individuals.

The institutional portion of the deal was also undersubscribed, leaving existing shareholders to buy 396.25 million shares in the IPO.

Reuters

(HK Edition 10/23/2008 page3)