Trading in newly listed China National Aviation (CNAC) stock on the Hong Kong exchange got off to lacklustre start on 17 December, with shares struggling to sustain their issue price.

CNAC has placed 338 million newly issued shares with institutional investors and a further 37.7 million in the form of an initial public offer, representing 11% of overall stock. The issue is estimated to have raised around $80 million and increased the company's total capitalisation to HK$ 5.5 billion ($710 million).

It had been originally hoped to price the issue at between H$1.96 and HK$2.58 per share and complete the listing in October. CNAC in the wake of the recent market turmoil was forced to postpone the float and then lower the issue price to HK$1.63 a share at a diluted price earning ratio of 12.5 times.

"There has been a subdued but positive reaction to the CNAC offer, particularly given the very bearish nature of the market we're seeing at the moment," says a senior Hong Kong financial analyst.

An additional 270 million shares, or 8.8% of existing stock, was given to issue underwriter Peregrine Capital and the Chao family. The latter deal forms part of a share swap, which has increased CNAC's controlling interest in Hong Kong regional carrier Dragonair from 36% to 43.29%.

In a separate transaction, CNAC (Hong Kong) has sold 370 million of its own 2.5 billion shares in the newly listed CNAC group to nine strategic Hong Kong investors, including Cathay Pacific, Citic Pacific and Hutchison Whampoa. As part of the reported HK$500 million deal, the nine new shareholders have undertaken not to sell the stock for 12 months.

Meanwhile, Shenzhen Airport in China plans to sell 100 million domestic A-shares early in 1998, aiming to raise ´640 million ($78 million) towards the cost of a new passenger terminal .

Source: Flight International