Metallurgical Corp of China, the firm that helped build Beijing's Bird's Nest Olympic stadium, made a modest debut in Shanghai on Monday, in a sign that a flood of new equity is weighing on market sentiment.

The lukewarm start by the world's 12th-biggest engineering contractor signaled that mainland share debuts, which have attracted heavy speculative buying, could struggle as firms line up to tap funding in a market that is down 15 percent from its 2009 high in early August.

That could pose a challenge for China International Travel Service Corp, the country's biggest travel agency, which is next in line with a Shanghai IPO raising about 1.7 billion yuan ($249 million).

MCC shares opened 35 percent above their IPO price of 5.42 yuan, slightly higher than a forecast by six analysts surveyed by Reuters, but well below the average first-day rise of more than 60 percent by other listed Chinese companies this year.

This is a pretty weak debut, reflecting current market sentiment, said Li Xianming, strategist at Ping An Securities Co. If the debut were a few days earlier, the price should have been higher.

Analysts said investors were also concerned about MCC's growth prospects given an expected slowdown in investment in a domestic steel industry facing huge overcapacity.

MCC, part-owned by leading steelmaker Baosteel, is China's oldest and biggest construction firm in the metals industry. Its businesses also include mining, equipment making and real estate development.

MCC faces political and currency risks in its overseas mining projects, said Wang Dong, analyst at TX Investment Consulting Co.

In China, slower investment in the iron and steel industry, as well as possible policy changes toward the steel sector, could hurt some of its businesses.

MCC has said it would use the IPO proceeds to pay for mining rights in Afghanistan, Argentina and Pakistan, and iron and steel projects in Australia, India, Vietnam and Mongolia. It would also repay bank borrowings and supplement working capital.

By 0625 GMT (2:25 a.m. EDT), MCC shares were up 24 percent at 6.71 yuan in a broader market .SSEC that was down 1.3 percent at its lowest in nearly two weeks.

MCC's listing followed a 3 percent drop on the benchmark Shanghai Composite Index on Friday as investors worried about a surge in new equity supplies.

Shares of Sichuan Expressway, the first listing on the Shanghai bourse since China lifted a 10-month ban on share sales in July, more than doubled on their debut. The two other Shanghai IPOs this year, by China State Construction Engineering Corp and China Everbright Securities, also fared better.

MAY STRUGGLE IN HK DEBUT

MCC, China's first company this year to dual-list in Hong Kong and on the mainland, will start trading in Hong Kong on Thursday after raising $5.12 billion in both markets in the world's second-biggest IPO this year after China State Construction's $7.3 billion offering in July.

Wang Sheng, analyst at Shenyin & Wangguo Securities Co, said the Shanghai debut may impact trading in Hong Kong.

I don't think MCC's shares would have much room to rise in Hong Kong, if the Shanghai stock price trends lower, he said.

A series of major Chinese IPOs has come to market since July, after Beijing lifted a share sale ban aimed at propping up the country's two stock markets amid the global financial crisis.

Investor concern over a surge in equity and fears of lending curbs hit the benchmark index last month, although the market has since stabilized due in part to government assurances that it will not tighten monetary policy.

MCC's debut price values the company at about 29 times its estimated earnings for 2009.

MCC's net profit almost halved to 3.76 billion yuan ($550.7 million) in 2008, though China Securities Co has forecast a rebound to 4.8 billion yuan this year. MCC posted first-half earnings of 2.68 billion yuan, but gave no year-ago comparison.

(US$1=6.832 Yuan) (Editing by Ian Geoghegan)

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