HONG KONG -(Dow Jones)- China Construction Bank Corp.'s (0939.HK) shares, which were priced at HK$2.35 each last week, made a lackluster debut on the Hong Kong stock exchange Thursday, with analysts saying the stock is already close to fair valuation.

At the close of morning trading, CCB's shares were at HK$2.375, a mere 1.1% higher than the IPO price. The stock opened at HK$2.375 and traded in a tight range of HK$2.35 to HK$2.375 over the morning.

The 33-company Hang Seng Index was at 14390.77, down 0.47% from the previous close, at the recess.

Fund managers see little upside for the stock in the short term. Agnes Deng, a fund manager at Standard Life Investments in Hong Kong , said CCB's shares are already close to fair valuation.

CCB's stock was priced at 1.95 times its expected book value for 2005, a premium to listed peer Bank of Communications Ltd. (3328.HK), which sold a US$ 1.9 billion IPO in June for 1.6 times book value. This largely factored in the stronger economic growth in China, which should help strengthen CCB's earnings prospects.

CCB Chairman Guo Shuqing said he was pleased with the stock's debut. "I think the market is the market. There's supply and demand. Many factors determine price. I think stable trading would be very ideal," Guo told reporters at the bourse.

He said the IPO price was set during a roadshow when the stock was pitched to institutional investors.

"We're completely reflecting the wishes of the institutional investors and Hong Kong investors," said Guo.

CCB's US$8 billion IPO was priced near the top of its indicative price range of HK$1.90 to HK$2.40.

A person familiar with the deal said many fund managers were prepared to buy shares around HK$2.25 to HK$2.30, but felt HK$2.35 was too close to the top of the pricing range.

What is more, the timing for the debut coincided with generally weak conditions on the Hong Kong stock market, which has been rattled by economic uncertainties in the U.S. and the specter of an outbreak of avian flu. As a result, recent Hong Kong IPOs have performed weakly.

The share prices of China Yurun Food Group Ltd. (1068.HK), a mainland meat processor, and Kasen International Holdings Ltd. (0496.HK), a leather products firm, have fallen 15% and 12%, respectively, since their trading debuts last week.

Most institutional investors are holding CCB stock as a buy-and-hold investment on expectations of long-term growth.

"If you expect CCB to have healthy growth with very little deterioration of its asset quality, there will be more upside to CCB shares in the long term," said Standard Life's Deng.

-By Keri Geiger, Dow Jones Newswires; 852-2802-8002; keri.geiger@dowjones.com

-Edited by Sharon Buan

(END) Dow Jones Newswires

10-27-05 0100ET Copyright (c) 2005 Dow Jones & Company, Inc. Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.