Chinese chipmaker slumps on debut

China offers investors a massive market and booming growth

China's largest chipmaker had a rough debut in New York and Hong Kong as shares tumbled on concerns about the veracity of its accounting.

Shares of Semiconductor Manufacturing International (SMIC) fell 11% in the US and slumped 7% in Hong Kong.

Investors were spooked by the company admitting its chief financial officer had made "inaccurate statements".

Thursday's wobble may impact on the other Chinese companies planning to list on foreign exchanges this year.

Accounting concerns

While analysts expect demand to remain strong, they said that investors may now not be willing to pay such high prices to tap into one of the world's fastest growing economies.

Especially as China Life, 2003's biggest flotation, has revealed accounting irregularities at its state-owned predecessor worth more than $600m.

Having said that, 2004 promises to be a bumper year for Chinese companies with almost $23bn-worth of share sales planned.

Among the companies attempting to lure foreign investors are phone company China Netcom, China Construction Bank, Air China, China Power and carmaker Dongfeng Motor.

Most investors, meanwhile, seem to be aware that buying into Chinese companies can be risky because accounting regulations are often less stringent than in the US and Europe.

"I am not very disappointed because these things do happen," said Wong Kam-yung, who bought SMIC shares in the public offering. "I am going to wait a bit to see if it will rebound. The quality of the company is not bad."

SMIC's US-listed shares closed at $15.50 in New York and at HK$2.50 in Hong Kong.