Shares in Belle International Holdings, the largest mainland women's footwear retailer, rose a less than expected 31.29 per cent on their trading debut yesterday on a down day for the market.
The value of the stock jumped in early morning trading by as much as 36.29 per cent to HK$8.45 from the offer price of HK$6.20, before closing at HK$8.14. About HK$5.78 billion worth of shares changed hands.
The shares had earlier traded in the grey market at between HK$8.80 and HK$9.
For each board lot of 1,000 Belle shares allotted in the initial public offering, investors could have made as much as HK$2,250 if they sold out at the peak.
The Hang Seng Index ended lower for a second consecutive day, falling 0.22 per cent to 20,798.97 points. Turnover was HK$59.11 billion.
Belle's market value yesterday reached HK$66.5 billion, making it the largest retail stock in Hong Kong. The stock closed at about 55 times this year's earnings, much higher than the average price-earnings ratio of 27.5 for other mainland footwear retailers.
'Strong market liquidity can support the stock at a high valuation but who knows what will happen if the market turns down suddenly,' a portfolio manager said.
Belle raised HK$8.6 billion from its first share sale, after it priced the shares at the top end, boosted by an overwhelming response from investors.
The offering received 516 times the number of shares available in the retail offering, soaking up a Hong Kong record of HK$434 billion in funds. Belle owns more than 2,800 women's footwear stores and concessionaire counters, and more than 1,050 sports shoe stores under the brands Belle, Teenmix, Tata and Staccato. It also is the largest mainland retailer for Nike and Adidas.
Investors have been especially eager to buy into the new issues of consumer plays.
'Investors are shying away from either industrial or property offerings despite relatively low valuations. They are betting on consumer stocks heavily due to higher potential growth and bigger returns,' said an investment banker.
Total consumption in the country rose 15.5 per cent during the most recent golden week to reach 320 billion yuan, the Ministry of Commerce estimated.