Beijing Enterprises shares treble in price

Beijing Enterprises, the most oversubscribed new issue to come to the Hong Kong market, fulfilled expectations by making its debut yesterday with a trebling of its issue price.

It also topped the list of most actively traded stocks with 2.57 billion shares changing hands during the day. More than 10,000 people joined a monster queue to collect refund cheques for unsuccessful applicants, and share certificates for those lucky enough to grab a slice of the action.

Speaking at the launch on the floor of the Stock Exchange, Beijing Enterprises chairman, Hu Zhaugang, who is also a vice mayor of Peking, said: "We know expectations are great and we are feeling the pressure to make the company perform and meet these expectations."

At current levels the shares are rated at more than 60 times forecast profits, compared with a market average of some 16 times. This implies a Herculean task for Mr Hu and his colleagues, who preside over a hotchpotch of investments ranging from McDonald's hamburger bar franchises to interests in China's largest brewery and the administration of ticket sales for the Great Wall.

Many of Beijing Enterprises' investors took their profits but Li Ka- Shing, Hong Kong's most influential investor, said his company, Cheung Kong Holdings, planned "to keep this investment for a very, very long time". Investors had to bid for at least 700,000 shares to secure an allocation of some 2,000.

It is hard to estimate how much Beijing Enterprises profited from overnight interest on cheques cashed in following the frenzied subscription rush which drew in HK$238.8bn (pounds 18.9bn) as the issue was oversubscribed 1,276 times. One source connected with the issue said the interest earnings had totalled over pounds 60m.

The enthusiasm for Beijing Enterprises, a so-called "red chip" counter, reflects the belief that companies with strong political connections are likely to flourish when Hong Kong returns to Chinese rule in July.

The newly listed company, in which Peking's local government holds an indirect 69 per cent stake, is seen as a premier example of a political deal maker which will leverage its connections to draw in the kind of business prospects denied to outsiders.

Mr Hu was quick to place a political interpretation on the success of his company's listing. "It reflects people's confidence in Hong Kong after the handover," he said.

However, the last great red chip bonanza, which erupted in 1993, quickly gave way to doubt and then disillusion.