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Chinese game developer Forgame surges in HK trading debut

By Elzio Barreto

HONG KONG (Reuters) - Shares of Forgame Holdings Ltd <0484.HK>, China's largest developer of Web games, soared more than a third in their Hong Kong trading debut on Thursday, underscoring investor optimism for technology companies that have fueled rallies on the Nasdaq this year.

Forgame's offer generated strong interest from small investors and was priced near the top of a marketing range, raising about $206 million. Investors who missed out on the shares chased the stock on Thursday, sending the stock's value up as much as 36.5 percent, compared with a 0.8 percent rise the technology sub-index on the Hong Kong stock market.

The debut comes on the heels of a 25 percent rally in the technology heavy Nasdaq Composite index <.IXIC> this year and an even stronger gain in Hong Kong listed technology stocks. Chinese technology stocks are particularly in favor because of the growth outlook for the country's Internet companies, traders said.

"People are over-optimistic on this sector," said Alvin Cheung, associate director at Prudential Brokerage. "Their thinking and prediction is heavily dependent on the market. When the market is okay, they have an automatic positive opinion on the stock, but they can change their minds very, very quickly."

The stock opened at HK$61.75 and traded as high as HK$69.60, compared with the initial public offering price of HK$51.00 each. The deal was marketed in a range of HK$43.50-HK$55.00.

The technology sub-index of Hong Kong-listed companies <.TRXFLDHKPTEC> has surged 51 percent so far this year, compared with a 2.4 percent gain in the benchmark Hang Seng index <.HSI>.

The company's offer was swamped by orders from small investors, with the retail portion generating more than 300 times demand than the shares on offer, a company filing said on Wednesday. The institutional tranche of the IPO was "very significantly over-subscribed."

Forgame's strong show is a bright spot in an otherwise grim IPO market in Asia-Pacific, where deal volumes are down 34.4 percent for the first nine months of this year, according to Thomson Reuters data.

The company plans to use about 60 percent of the IPO funds to buy game licenses and for takeovers of other game publishers and developers inside and outside China. Another 20 percent of the proceeds will be used on expand its online and mobile game business, with the remainder used to open offices abroad and on working capital.

The company is controlled by its five founders, with other top shareholders including private equity firm TA Associates and Chinese venture capital company Qiming Venture Partners.

JPMorgan and Morgan Stanley acted as joint global coordinators for the IPO, with China International Capital Corp and Macquarie also working as joint bookrunners.

The banks stand to earn as much as $8.2 million, equivalent to up to 4.5 percent of the proceeds, in commissions and incentive fees. That is among the highest fees paid on an IPO this year in Hong Kong and compares to the up to 6.1 percent in fees China Harmony Auto agreed to pay on its $215 million IPO in June and the up to 8 percent for PanAsialum Holdings' $160 million listing in January.

(This story corrects the company name in the second and eighth paragraphs)

(Additional reporting by Denny Thomas; Editing by Michael Urquhart and Matt Driskill)

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