UNITED Rusal, the world’s largest aluminium producer, yesterday fell in its Hong Kong trading debut as demand for new equity waned and investors remained wary of the company’s debt.
The Moscow-based company declined 9,2% to HK9,81 before midday, from the listing price of HK10,80. Rusal, the first initial public offering in Hong Kong this year, will use net proceeds of HK16,7bn (2,1bn) to pay down 14,9bn of debt.
Rusal had banked on a more positive reception in Hong Kong.
“The market sentiment right now isn’t very good,” OSK Asia Holdings analyst Helen Lau said. “Investors are concerned about its debt risks.”
Barred from marketing to retail investors, Rusal found buyers for all the stock on offer after winning investments from Asian billionaire Li Ka-shing and New York hedge- fund manager Paulson .
Hong Kong’s Hang Seng index and aluminium prices have dropped this week as investors globally retreat from risk on concern that lending curbs in China, and US plans to rein in banks, will stifle the global economic recovery.
“The market sentiment right now isn’t very good,” said Helen Lau, an analyst at OSK Asia Holdings. “Investors are concerned about its debt risks. If the market outlook for aluminium improves and the potential risks diminish, people would be interested.”
Aluminium prices in Shanghai have dropped 8% from this year’s high on January 7. The Hang Seng index was little changed yesterday, after a five-day losing streak that had extended a decline from its November 16 high to 12%.
Investors are concerned the Chinese government will rein in liquidity to contain asset bubbles after China posted the fastest economic growth since 2007 in the fourth quarter.
“You’ve seen what’s happened with the financial situation in recent days,” Rusal CEO Oleg Deripaska said yesterday in the city. Yesterday’s price was “reasonable”, he said.
Rusal, the first Russian company to list in Hong Kong, had its offering delayed at least twice by regulators and restricted to wealthy and corporate investors on concern about its debt. The stock trades in blocks of 24000 shares.
“The minimum trading board lot plus the weak market atmosphere will be obstacles for retail investors,” said Allen Wong, a senior research analyst at Quam in Hong Kong.
Rusal reserved about 39,4% of the shares for Malaysian billionaire Robert Kuok, hedge fund Paulson, NR Investments , the principal investment company of Nathaniel Rothschild of the banking family, and Russian state development bank Vnesheconombank, or VEB.
Yesterday’s decline means shares owned by Paulson, NR Investments and Kuok would have a combined paper loss of about HK156 m.
The offering price gives Rusal an enterprise value that is 11,7 times th is year’s earnings before interest, tax, depreciation and amortisation, or Ebitda, people familiar with the sale said last week. Aluminium Corporation of China , the nation’s largest producer of the metal, known as Chalco, trades at an enterprise value 13,8 times its 2010 Ebitda .
“Some analysts say that Rusal is most sensitive to aluminium price changes, which might be true,” Quam’s Wong said. “But it seems prudent to buy Chalco,” which would also benefit from higher prices without Rusal’s debt, Wong said.
China, the world’s largest metal consumer, spurred price increases in raw materials last year on its 586bn stimulus spending.
Shares of Beijing-based Chalco gained 0,9% to HK8,25 in Hong Kong. Rusal’s public offering comes less than two months after it completed Russia’s biggest corporate debt restructuring. Bloomberg
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