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

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

SHANGHAI (Reuters) Chinese oil giant CNOOC (NYSE:CEO) Ltd surged as much as 44% in its Shanghai debut on Thursday, after raising 28.08 billion yuan ($4.41 billion) in China's 11th-biggest public stock offering.

The stock started trading on the Shanghai Stock Exchange at 12.96 yuan, 20% higher than the offering price of 10.8 yuan.

Trading in the oil giant was suspended by the exchange after the stock hit the upper limit of the daily allowable price band for new listings, citing abnormal fluctuation, defying a weak market that saw China's blue-chip index shed 0.5%.

CNOOC's Hong Kong-listed stock was up surged as much as 4.3% before paring gains.

"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."

China's largest offshore oil producer, CNOOC has said it would use the share sale proceeds to fund one gas and seven oilfield projects in China and overseas, and to replenish capital.

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

CNOOC starts 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 Co Ltd and electronics firm Rigol Technologies Co Ltd tumbled more than 30%.

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% so far in 2022.

The Shanghai sale came after CNOOC was delisted in October by the New York Stock Exchange after the U.S. government added the firm to a trade blacklist citing suspected connections to China's military.

State-backed peers PetroChina Co Ltd and China Petroleum (NYSE:SNP) & Chemical Corp (Sinopec (NYSE:SHI)) are already listed in Shanghai.

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