Chinese car-maker in $731m float

HONG KONG - Dongfeng Motor, China's third-biggest car-maker, raised HK$3.97 billion ($731 million) in an initial public offering in Hong Kong, pricing the shares in the middle of its range, bankers involved in the sale said.

The company, which makes Nissan, Honda and Citroen cars and is based in central China's Wuhan city, sold shares at HK$1.60 each, or 9.1 times its 2005 forecast profit, the bankers said. Denway Motors, which makes Honda passenger cars in southern China, trades at about 9 times projected 2005 earnings.

Discounts and rising competition in the world's third-biggest vehicle market prompted Dongfeng to delay the share sale by a year and cut its funding target in half. Profit margins at China's 112 car-makers and parts makers have fallen by half in the past year to 5 per cent, according to Government estimates.

"The worst is probably over" in the Chinese car industry, said Joseph Lau at Tai Fook Asset Management in Hong Kong. "Steel and fuel prices have come down ... so I think the industry should turn around soon."

Chinese share sales totalled US$19.5 billion this year, dominated by a US$9.2 billion IPO by China Construction Bank.

Dongfeng will be the biggest Chinese car-maker listed outside the country when its shares begin trading on December 7.

- BLOOMBERG