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Kingsoft shares soar on first day
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Shares in software and online games company Kingsoft Corp surged 39 percent in its Hong Kong trading debut yesterday, as investors rushed to buy relatively low-priced mainland shares.

 

Its shares closed at HK$5, compared to the offer price of HK$3.6 after it hit an intra-day high of HK$5.42.

 

"I was surprised by the robust performance of Kingsoft. I predicted its share price would rise about 20 percent, so it did outperform expectations," said Kenny Tang Sing-hing, associate director of Tung Tai Securities.

 

Tang said the overall performance of software stocks on the local bourse is typically modest, given the risky nature of the industry.

 

"Research and development costs can be very expensive. However, the entry barrier for the products tends to be low, making the industry very competitive," said Tang.

 

He said the price-earnings ratio for Kingsoft was already too high at 50 times.

 

Castor Pang, a financial strategist at Sun Hung Kai, agreed. He said the software company's strong debut was mainly driven by investors' fervent demand for cheaper stocks.

 

"When you look at Kingsoft's fundamentals, I think there is no reason to support the high share price in the long run," said Pang. He said online gaming is a sector that is both capital-intensive and difficult in terms of client retention.

 

"The shares have already soared too much. So in the short run I expect a downward correction for Kingsoft as investors take profit," said Pang.

 

Kingsoft is the mainland's flagship software maker and has been looking to online gaming in recent years.

 

Guangdong-based property developer China Aoyuan Property also made a strong debut yesterday, rising 31 percent to HK$6.8 - more than its initial offer price of HK$5.2.

 

(China Daily October 10, 2007)

 

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