Metallurgical Corp of China's disappointing debut on the Hong Kong Stock Exchange is not surprising, said Alvin Chong, head of research at Sun Hung Kai Financial.
Metallurgical Corp of China (MCC), Hong Kong's biggest initial public offering this year, sank as much as 13% on Thursday, to become the territory's worst debut so far this year.
Chong attributed the dismal performance to MCC's China debut on Monday, as it did not climb as much as some of the other China A-shares.
"We are also looking at the some of the IPOs that are coming on the market being a lot higher, in term of valuations. So it's not surprising what the (MCC) shares have been doing," he told CNBC.
"Also, the valuation we're looking at about 27x P/E and price to book about 2.7x -- that's much higher than some of the construction companies' average, the equipment manufacturers' average and even the property developers' average. Those P/Es average between 15x and 23x and the price-to-book, about 1.5x to 2.3x versus price-to-book at Metallurgical of about 2.7x."
So high valuation, diminished appetite due to the higher valuation other IPOs, and the fact that its Shanghai debut didn't do as well as some of the other ones, all added downside pressure on the stock, Chong concluded.