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Tepid debut for developer
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08:52, October 09, 2007

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Shares in SOHO China rose 15 percent yesterday in a "modest" Hong Kong trading debut, with investors cautious about the property developer's vulnerability to government measures to cool the sector.

Shares in the Beijing-based company ended at HK$9.55 after hitting an intra-day high of HK$10.2, compared to the offer price of HK$8.3.

"SOHO China's debut is quite underwhelming," said Marco Mak, head of research for Taifook Securities. "This is mainly due to SOHO China's focus on the commercial development of one city, Beijing."

SOHO China's first day of trading pales in comparison to the stellar trading debuts of other recently listed mainland property developers.

Sino-Ocean Land, which started trading its shares on the local bourse last Friday, closed at HK$11 - 43 percent more than the initial public offering (IPO) price of HK$7.7 per share. Country Garden Holdings also traded at 35 percent over its IPO price when it listed in April.

"Compared to other mainland developers, SOHO China is only focused on developing commercial properties," said Mak.

"Given the cyclical nature of this segment, whether the company will maintain a comfortable profit margin will depend on the availability of land," said Mak. "This could be a challenge, and typically the profits for the commercial development segment are usually more volatile."

SOHO China's share price will likely hover around the current levels without much room to spike, according to Kitty Cheung, an analyst at Bank of China.

"The IPO price of HK$8.3 is already very aggressive given the relatively small size of the company," said Cheung, adding its price-earnings ratio is 30 times.

Source: China Daily

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