China oil giant CNOOC soars in Shanghai debut, defying weak market

SHANGHAI (REUTERS) - China’s CNOOC saw its stock surge as much as 44 per cent in its Shanghai debut on Thursday (April 21) in defiance of overall market weakness, as investors sought safety in the oil giant amid lofty energy prices and quickening inflation.

The company’s A-shares started trade 20 per cent higher than its offering price. But the Shanghai Stock Exchange almost immediately imposed a 30-minute trading suspension when the price hit the upper limit of the daily allowable band for new main-board listings, citing abnormal fluctuation.

The stock trimmed gains to finish the first day of trade at 13.79 yuan, up 28 per cent.

CNOOC’s Hong Kong-listed shares closed down 2.7 per cent after surging as much as 4.3 per cent.

“CNOOC is being chased by investors who are seeking shelters in big caps with relatively low valuation and high dividends,” said Linus Yip, chief strategist at First Shanghai Group. “The stock also whets market appetite at a time when oil prices are climbing and inflation accelerating.”

The Shanghai sale came after CNOOC was delisted in October by the New York Stock Exchange after the US government added the firm to a trade blacklist citing suspected connections to China’s military. CNOOC said it had operated in accordance with local laws.

State-backed peers PetroChina and China Petroleum & Chemical Corp (Sinopec) are already listed in Shanghai.

China’s largest offshore oil producer raised 28.08 billion yuan (S$5.95 billion) in the country’s 11th-biggest public stock offering. It said it would use the proceeds to fund one gas and seven oilfield projects in China and overseas, and to replenish capital.

The debut was the largest in China and the fourth largest globally this year, according to data compiled by Bloomberg.

“CNOOC represents historic investment opportunities due to high oil prices, low valuation, and consistent high dividend yields,” wrote Chen Shuxian, analyst at Cinda Securities, adding CNOOC’s market cap has potential to double over the next few years.

CNOOC started trading in Shanghai against a backdrop of a bleak stock market that has witnessed an increasing number of stocks dipping below initial public offering (IPO) prices.

A third of the roughly 100 companies newly listed this year in Shanghai and Shenzhen dropped below offer prices on debut, showed data from East Money Information. Some, including chipmaker Vanchip Tianjin Technology and electronics firm Rigol Technologies tumbled more than 30 per cent.

Such debut performance - in sharp contrast with the first-day pop that once featured in China’s stock markets - reflects the result of IPO reforms, as well bearish investor sentiment.

China’s tough Covid-19 containment measures at a time of heightened geopolitical risk are also roiling its stock markets, sending the main benchmark stock index down 18 per cent so far in 2022.

Yang Hongxun, an analyst at investment consultancy Shandong Shenguang, said many stocks that slump on debut are small caps with lofty valuations, whereas CNOOC was priced modestly.