China’s CNOOC Ltd saw its shares soar as much as 44% in its Shanghai debut on Thursday in defiance of overall market weakness as investors sought safety from the oil giant amid high oil prices. energy and accelerating inflation.
The stock started trading 20% higher than its offer price. But the Shanghai Stock Exchange almost immediately imposed a 30-minute trading suspension when the price hit the upper limit of the daily band allowed for new listings on the main board, citing abnormal fluctuation.
The stock ended the morning up 28.8% in a market that saw China’s blue chip index down 1.4%. The Hong Kong-listed CNOOC share fell about 3% after surging 4.3%.
“CNOOC is being chased by investors seeking shelter in large caps with relatively low valuations and high dividends,” said Linus Yip, chief strategist at First Shanghai Group. “The stock is also whetting market appetite at a time when oil prices are climbing and inflation is accelerating.”
China’s largest offshore oil producer raised 28.08 billion yuan ($4.41 billion) in the country’s 11th-largest public offering. He said he would use the proceeds to fund one gas project and seven oil projects in China and overseas, and to replenish capital.
“CNOOC represents historic investment opportunities due to high oil prices, low valuation and consistently high dividend yields,” Cinda Securities analyst Chen Shuxian wrote Thursday, adding that CNOOC’s market capitalization has the potential to double over the next few years.
CNOOC begins trading in Shanghai amid a lackluster stock market that has seen an increasing number of stocks fall below initial public offering (IPO) prices.
A third of the nearly 100 companies newly listed this year in Shanghai and Shenzhen fell below offering prices on their debut, according to data from East Money Information. Some, including chipmaker Vanchip Tianjin Technology Co Ltd 688153.SS and electronics company Rigol Technologies Co Ltd fell more than 30%.
Such an early performance – in stark contrast to the first-day pop that once featured in Chinese stock markets – reflects the outcome of IPO reforms, as well as bearish investor sentiment.
China’s strict COVID-19 containment measures at a time of heightened geopolitical risk are also disrupting its stock markets, sending the main benchmark stock index down 18% so far in 2022.
Yang Hongxun, an analyst at investment advisory firm Shandong Shenguang, said many stocks that are crashing in their debut are small caps with high valuations, while CNOOC’s price was modest.
CNOOC’s Shanghai offering will rank among the top 10 largest listings in China if a green shoe option is fully exercised. Refinitiv data showed. Its shares were priced at 10.8 yuan, or 23.88 times earnings or 1.05 times net assets.
The Shanghai sale came after CNOOC was delisted in October by the New York Stock Exchange after the US government added the company to a trade blacklist citing alleged links to the Chinese military. CNOOC said it operated in accordance with local laws.
PetroChina Co Ltd and China Petroleum & Chemical Corp (Sinopec) are already listed in Shanghai.
(Reuters – Reporting by Jason Xue, Samuel Shen and Andrew Galbraith; Editing by Muralikumar Anantharaman and Christopher Cushing)