Goldman Sachs props up PetroChina after poor IPO

Goldman Sachs has been actively buying PetroChina shares in New York and Hong Kong in an effort to stem losses on the stock''s first day of trading

Goldman Sachs has been buying PetroChina shares in both New York and Hong Kong in an effort to stop the price tumbling in the wake of the stock's listing.

"I reckon last night Goldman Sachs picked up $200 million worth," says one sales trader. "I reckon today Goldman accounted for around 75% of turnover in the stock."

The ADS' traded in a narrow range when they made their debut in New York last night and the counter closed at $16.44, unchanged from its issue price. In Hong Kong trading today, Goldman has been buying PetroChina H-shares all the way down from their HK$1.27 issue price.

"They are putting orders through other brokers as well - I know that for a fact," says one broker.

PetroChina ended its first day of trading in Hong Kong down HK$0.06 at 1.21, up from a low of HK$1.17, on turnover of HK$871 million ($112 million).

A doomed start

The PetroChina listing appeared doomed from the start, the issue size having been slashed by more than half to $2.9 billion and even then necessitating the participation of BP Amoco and a number of Hong Kong tycoons in order to get off the ground.

The recent sharp drop in oil prices and investors' lack of appetite for old-economy stocks meant demand was weak, with the retail tranche only 5% oversubscribed. In addition, US labour and human rights organizations urged a boycott of the listing.

Having pulled the flotation of CNOOC, the country's number two oil producer, on price grounds in November, the Chinese government was reluctant to withdraw from the PetroChina flotation. A second failure would have cast a cloud over future sell-offs.

The Chinese government has said it is still keen to float CNOOC as well as China Petrochemical Corporation, China United Telecommunications and Baoshan Iron and Steel.

Goldman Sachs was lead manager for the PetroChina offering.

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