Shares in China's Zijin Mining Group jumped about 40% in their Shanghai debut on April 25, above analysts' forecast, boding well for future initial public equity offerings by major companies as China's market warms up after support by government policy moves.

Local-currency A shares in Zijin, which is also listed in Hong Kong, opened at 9.98 yuan (RM4.49) versus a Shanghai IPO price of 7.13 yuan and touched a high of 10.38 yuan in early trade.

They retraced slightly, trading 37.45% higher at 9.8 yuan at 0307 GMT.

A Reuters survey of four industry analysts had forecast the stock would trade around 9.5 yuan on its debut day, up 33% from its IPO price.

Chen Jinghe, the President of Zijin is shaking hands with an official

of Shanghai Stock Exchange on April 25, 2008.

Zijin's expansion plans and prospects for sustained gold demand in the world's fourth-largest economy had been expected to bolster the share price.

"Zijin's better-than-expected debut will be a boost for forthcoming major IPOs," said Chen Jinren, a senior stock analyst at Huatai Securities in Nanjing.

"But as its price in early trade was not underpinned by company fundamentals, we believe it may not be sustained in coming days."

China's benchmark Shanghai Composite Index edged 0.79% lower to 3,554.667 points on Friday, after a 9.3% jump on Thursday spurred by the government's announcement of a cut in the stock trading duty by two-thirds, sending a strong supportive signal to the market.

Chen Jinghe, the President of Zijin is knocking the Gong at

Shanghai Stock Exchange  on April 25, 2008.

The index had plunged as much as 51% from last October's record peak to a 13-month low on Tuesday, dragged down by high inflation, the possibility of an economic slowdown this year, and heavy supplies of fresh equity, virtually delaying plans by any major companies to launch IPOs.

Zijin, China's second-largest gold producer, raised 10 billion yuan in the mainland's first major IPO in two months, after a US$3.1 billion (RM9.92 billion) issue by China Railway Construction in the second half of February.

It has said it would invest 4.92 billion yuan of the IPO proceeds in expansion projects, including overseas acquisitions in Britain and Tajikistan, while further proceeds would go towards repaying bank loans or serve as working capital.

"Although Zijin has the best assets among China's gold producers and its short-term prospects are strong, its debut price is really too high taking into consideration the recent retreat in global gold prices and the company's high IPO price," said Shi Weiping, industry analyst at Orient Securities.

The spot gold price lingered around a three-week low below US$900 an ounce on Friday, having fallen from a record peak of US$1,030.80 in March.

Zijin priced its IPO shares at more than 40 times its 2007 earnings, double the usual practice in China of pricing IPOs around 20 times historical earnings.

Zijin's competitors include bigger, unlisted China National Gold Group Corp, and smaller listed rivals such as Shandong Gold and Zhongjin Gold.

China, the world's fourth-largest gold producer and one of the few countries where gold is particularly valued as a store of personal wealth, has per capita gold reserves of three grams, compared with a global average of 25 grams and up to 200 grams in Western developed nations.

Based on an A-share price of 10 yuan, Zijin was worth around US$18 billion, making it one of the world's top five gold miners by market capitalisation.

That would give it a price-to-earnings (PE) ratio of 45 times analysts' earnings forecast for 2008, in the middle of its domestic peers' valuations but dearer than global giants.

Barrick Gold has a 2008 forecast PE of 17 times and Goldcorp of 28 times, according to Reuters Estimates.

At 10 yuan, Zijin's A shares enjoyed a 50% premium over their Hong Kong-listed H shares, which were trading at HK$7.47 (RM3.02) on Friday morning. That exceeds an average premium of 38% for all dual-listed A shares against H shares of the same companies.