Alibaba.com became Hong Kong's most profitable initial public offering (IPO) stock yesterday after an astonishing trading debut. Shares in the e-commerce portal skyrocketed 192 percent on its first day to close at HK$39.5.

 

Investor optimism pushed the largest mainland business-to-business (B2B) operator's shares to an intra-day high of HK$39.95, or 196 percent more than its IPO price of HK$13.5. Each lot of Alibaba, which comprises 500 shares, will equal a profit of HK$13,000.

 

The B2B operator was the most hotly traded stock on Hong Kong's bourse yesterday, generating a whopping HK$17.4 billion in turnover that took up 10.3 percent of total turnover of all main board stocks.

 

"It is very apparent that a lot of capital is rushing in to buy Alibaba.com," said Linus Yip Sheung-chi, a strategist at First Shanghai Securities. "Hot demand will mean supply will continue to be strained. So I expect the share price might go up even more because of that."

 

The e-commerce portal's IPO raised $1.47 billion, while the retail tranche in Hong Kong alone generated HK$447.5 million as investors clamored to subscribe and a record amount of cash was frozen.

 

Market watchers were surprised by Alibaba's stellar trading debut. Many had expected it to be overshadowed by Monday's stock market plunge, which was sparked by Premier Wen Jiabao's comments that the direct investment scheme for mainlanders could see further delays.

 

"I cannot offer any comment as to whether the stock is overvalued or not. I think trading at almost 300 times its 2007 earnings forecast - it's pretty obvious what the answer is," said Wong Chi Man, an analyst at China Everbright Research. "Investors should ask themselves whether a company can in fact maintain growth of 200 to 300 percent in the next two to three years."

 

But opinions are divided about whether Alibaba is trading at a reasonable valuation.

 

Kenny Tang Shing-hing, associate director of Tung Tai Securities, remains optimistic about Alibaba's prospects, despite the hefty share price.

 

(China Daily November 7, 2007)