Shares of Sony Financial Holdings Inc rose nearly 4 percent on their debut on Thursday, as a stock market rebound boosted demand for the financial firm that recently completed Japan's largest IPO this year.

The $3 billion public offering was the latest step by Sony Corp to refocus on core products such as flat-screen TVs and digital cameras, and sell non-strategic assets.

But even as investors bought shares of Sony Financial, which includes an insurance, online and banking business, some market participants said the stock could be overpriced.

Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co Ltd, said investors buying the stock were likely to include many individuals hit by the recent market downturn.

It has the Sony name, which helps draw individual investors. It is also benefiting from its position as a newly listed stock, Akino said. Given the price, this is a relatively easy stock for individual investors to trade.

Sony Financial closed at 415,000 yen, off its high of 424,000 yen, and against its premarket price of 400,000 yen.

Some domestic market participants had forecast a debut of between 420,000 and 440,000 yen.

Tokyo's index of insurance stocks ended up 0.6 percent, while the main Nikkei 225 rose 1.6 percent.

The debut follows a three week rise in Japanese financial stocks, helped by optimism that the U.S. subprime mortgage crisis may be over.

Sony, the maker of Playstation game gear and Cyber-shot digital cameras, competes with Samsung Electronics Co Ltd in the global flat TV market, Microsoft Corp and Nintendo Co Ltd in videogames, and Canon Inc in digital cameras.

With 90 percent of its revenues and 80 percent of its recurring profit coming from life insurance operations, Sony Financial is now Japan's second listed life insurer after T&D Holdings Inc.

The closing share price valued Sony Financial at 903 billion yen ($7.7 billion), compared with T&D's around 1.8 trillion yen.

NOT SO HOT?

Some investors, including Ichiyoshi's Akino, said the stock looked pricey.

This doesn't look like it's going to be that hot, said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. It's market capitalisation is not that big and it doesn't look that cheap.

Based on the insurance operations' embedded value of 900.5 billion yen as of the end of the last business year, the current share price would put Sony Financial's price-embedded value ratio at 1.00, higher than T&D's 0.84.

Embedded value, widely used to assess life insurers' corporate value, is calculated based on adjusted net asset value and the present value of future profits from existing contracts with policyholders.

The listing follows a string of asset sales in a restructuring led by Chief Executive Howard Stringer.

Sony earlier this year cut its stake in online broker Monex Beans Holdings and last year sold interests in a wide range of retail activities such as cosmetics and restaurants.

Ahead of the listing, Sony offered 795,000 existing shares in Sony Financial, cutting its stake in the wholly-owned unit to about 60 percent. The financial unit sold 75,000 new shares.

Sony said last week the share sale would boost its pretax profit by 78 billion yen for the year to March, although it did not revise its annual outlook to account for the gain.

The IPO was lead managed by Nomura Securities and JPMorgan, which has experience in the insurance sector. JPMorgan was a bookrunner on Taiyo Life Insurance's IPO and advised on Taiyo's merger with Daido Life to form T&D Holdings.

Japan Investment Electronics Sony