Investors pounce on Air China IPO

HONG KONG - Air China, the nation's biggest international carrier, raised HK$8.36 billion ($1.52 billion) in an initial public offering after it priced its shares at the high end of a target range, said bankers involved in the sale.

The company sold 2.805 billion shares at HK$2.98 each, after investors ordered about US$20 billion of stock, said the bankers, who did not want to be identified. Air China needs cash to buy aircraft and pay debt.

The company benefited from investor enthusiasm for first-time share sales after Hong Kong's benchmark stock index this month rose to its highest since March 2001.

"The price is fair considering the competition in China and the risk of oil price fluctuations," said Andrew Chan, an investment analyst at Pacific Sun Investment Management. "The strong demand is more driven by the market sentiment than the company's fundamentals."

Air China earlier offered the shares at between HK$2.35 and HK$3.10 each, or 8.8 times to 11 times the 2005 profit forecast by banks arranging the sale.

Fund managers, who are entitled to 90 per cent of the offer, ordered US$11.5 billion of stock. Hong Kong individual investors ordered 83 times the stock originally available to them, or about US$9 billion worth, the bankers said.

China has negotiated an agreement with the United States that will increase allocated capacity fivefold over the next six years between the two countries.

- BLOOMBERG