Loose talk hits chip giant's debut

LOOSE talk can cost you dear - just ask Semiconductor Manufacturing International (SMIC). The Chinese contract chipmaker is raising £990 million in the world's third-largest initial public offering so far this year.

Its shares today made their longa-waited debut in Hong Kong, where once-eager punters had applied for more than 270 times the quantity of stock reserved for them in the run-up to the big day.

Backed by such strong demand - entirely typical of the interest generated by China-linked debutantes in recent months - the listing should have been a rip-roaring success. But SMIC shares crumbled when trade opened, slumping to HK$2.475 from their offer price of HK$2.69.

This followed an equally poor performance overnight for the company's new American Depositary Receipts. They were priced at US$17.50 but nosedived 11.3% to close at $15.52, even as other US-listed tech shares made gains.

The dismal starts left egg on the faces of the teams at Credit Suisse First Boston, the issue's global co-ordinator, and Deutsche Bank, joint book-runner and joint sponsor.

The principal problem appears to have been wayward comments from SMIC's chief financial officer, Jenny Wang, which ran counter to statements that the company had previously made in its filings with the US Securities and Exchange Commission (SEC).

At a recent Press conference Wang said SMIC had enough cash in the kitty to cover its capital expenditure needs for the rest of this year and all of 2005. But that did not square with its SEC filing.

SMIC issued a painful clarification last Friday, as the shares were being priced. The company bluntly said Wang's assessment was inaccurate, and added that a search for additional external financing was indeed on the cards.

The muddle clouded what should have been a straightforward market debut. If SMIC's own senior executives could not be counted upon to tell a corporate tale consistent with statements they had committed to paper what did that say about the company, they asked?

The SMIC debacle cast a pall over a market that should have been energised by robust performances overnight by both the Nasdaq and Wall Street. Brokers said additional downward pressure in Hong Kong came as British energy major Royal Dutch/Shell sold a strategic stake in Sinopec, the China energy firm.

Sinopec shares backtracked 10 cents or 3% to HK$3.15, the price at which they were placed. Shell's action followed a similar exit last month by BP, which sold its Sinopec stake at HK$3.125.

The two events dampened the mood in Hong Kong and the benchmark Hang Seng index dipped 36.76 points or 0.3% to 12,938.96. Global lender HSBC eased 50 cents or 0.4% to HK$118.50, and Bank of China (Hong Kong) dropped five cents or 0.4% to HK$14.85.

Hutchison Whampoa, the telecoms-to-ports conglomerate, shed 25 cents or 0.4% to HK$58 as investors awaited its results today.

In Japan, rallying tech plays and gains by domestic-focused companies helped the Nikkei 225 strike 11,647.71 points in early trade, its best showing in nearly two years. It later lost some gains, but held on to a 47.42-points gain to close at 11,484.28. Brokers said the feisty yen - and weak dollar - remained worrying.

Advantest, which makes chip-testing equipment, climbed 120 yen or 1.5% to 8320 thanks to the Nasdaq.