Last updated: September 19, 2012 8:36 am

JAL makes muted return to stock market

The relisting of Japan Airlines, the world’s second-biggest IPO this year after Facebook’s, was met by a tepid response from investors on Wednesday.

Shares of the company saw a modest lift on their Tokyo trading debut, closing 1.1 per cent above their IPO price at Y3,830, highlighting sluggish market activity and uncertainty about the global economic outlook. The airline was the eighth most heavily traded stock on the Tokyo exchange.

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JAL defied initial scepticism about its ability to return to health and relisted on the Tokyo Stock Exchange on Wednesday in less than three years after filing for bankruptcy.

The IPO was the biggest success story for the government-backed Enterprise Turnaround Initiative Corp, which injected Y350bn in 2010 to revive the company.

The airline, which relinquished the title of Asia’s largest airline by revenues to rival All Nippon Airways when it went bankrupt, returned to the market with a market capitalisation of Y695bn, making it the third-largest airline after Singapore Airlines and Air China by market capitalisation in Asia.

The IPO drew strong demand because of the low offer price and the shares had been expected to attract solid buying on their listing. In spite of being priced at the top end of the indicative range, JAL’s offering price gave it a valuation of five times forward earnings, or less than half the valuation of ANA.

Demand for JAL shares was not as strong as expected, however, in part because of cautious sentiment in Tokyo as investors focus on the Bank of Japan’s monetary policy. The stock touched a high of Y3,905 during the session, 3 per cent above the IPO price.

“Rather than feeling happy or sad in the short term about today’s share price, I would like to continue to manage the company steadily and raise JAL’s corporate value,” Yoshiharu Ueki, JAL’s president, said.

Sentiment was also damped by tensions between Japan and China over a group of disputed islands, which has sparked widespread anti-Japan protests in China and calls for a boycott of Japanese goods and services.

The listing “has been soggy and damp”, said Peter Eadon-Clarke, director of strategy at Macquarie in Tokyo. “Traders were talking about geopolitical tensions between Japan and China, which will result in weak traffic between the two countries for some time.”

ANA, JAL’s main Japanese rival, said it had suffered cancelled bookings by Chinese visitors planning trips to Japan and Japanese travellers going to China.

Instability in the oil market was another factor that unsettled investors, Mr Clarke said. That combined with strained relations between China and Japan and Middle Eastern uncertainties “probably does make it hard to focus on the fundamentals” of JAL, he said.

The carrier reported record operating profits in the first two years after bankruptcy, backed by massive cost cuts, tax breaks and debt waivers.

It also faces political pressure over the tax benefits it enjoys as a result of its bankruptcy rehabilitation, which have been criticised as giving it an unfair advantage. ANA and some opposition politicians are calling for restrictions on new airport slot allocations to JAL at Haneda, one of two airports serving Tokyo, in order to level the playing field.

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