Alibaba.com, China’s largest e-commerce portal, soared on its debut on Hong Kong’s stock market yesterday, tripling its share price.

The IPO is the biggest internet offering since the listing of Google. Fuelled by record demand from Hong Kong retail investors, the shares gained nearly 193 per cent to close at HK$39.50, compared with the IPO price of HK$13.50 that raised $1.49 billion (£713 million) for the company. Last night Alibaba.com, in which Yahoo! is a key investor, was valued at $25.6 billion, making it the world’s fifth-most valuable internet business.

Trading was so frenetic that the stock exchange took calls from brokers asking whether there were slow-downs in the order-placing system.

Jack Ma, chairman of Alibaba.com, said: “The price set is reasonable. I said it two weeks ago, and today’s performance has proven me right.”

The English teacher-turned-entrepreneur founded the online business-to-business site in the southern city of Hangzhou in 1999.

What began as a bulletin board for businesses to post trade leads has swollen into an online marketplace with 24 million members selling products as diverse as funeral urns and bras to laboratory glass and iron ore.

The firm’s IPO price had valued Alibaba.com at a startling 106 times forecast 2007 earnings, but its performance on its debut lifted that valuation to 316 times. That compares with Google, which is trading at 46 times, and eBay, at 23.5 times.

Shares in PetroChina, the oil and gas giant, made their debut in Shanghai on Monday, doubling in value and transforming the mainly state-held company into the world’s first trillion-dollar enterprise. However, analysts gave warning that the euphoria was more about buying into the China boom than investing in fundamentals. Francis Lun, general manager at Fulbright Securities, said: “There is a total absence of reason and cause for the stock’s sky-high price. It’s irrational and foolish.”

Since the number of shares available to individual investors in both flotations was small, it was easy for speculators to push up the price. Mr Lun said that Hong Kong investors were trading stocks as if they were playing at the baccarat table.

The global offering of 858.9 million shares in Alibaba.com, or a 17 per cent stake, was the biggest IPO by a Chinese internet company to date. The portion earmarked for retail investors – 25 per cent of issued shares – was 257 times oversubscribed.

The internet is becoming big business in China, which has more than 162 million web users – second only to the United States. For tens of millions of small and medium-sized enterprises scattered across the country, a marketplace such as that offered by Alibaba.com is one of the most effective ways to reach customers.

The website, which has both Chinese and English versions, offers free listings for suppliers and buyers. Revenue comes from a percentage of members who pay for additional services such as search listings or factory inspections. Robert Horrocks, head of research at Mirae Asset Global Investments in Hong Kong, said: “Because China is such a large, fragmented economy, the internet is an attractive tool.”

Alibaba.com is one of China’s fastest-growing internet companies, with registered members soaring to 24.6 million in 2007 from 6 million in 2004.

It reported a net profit of 295.2 million yuan (£19 million) in the six months to June, and is expected to post a 63 per cent rise in net profit next year to 1.02 billion yuan.

Just capital

— Market capitalisation is calculated by multiplying a company’s share price by the number of shares. But a market cap can be distorted if only a portion of its stock is available to investors, particularly if the exchange on which it is traded is isolated

— PetroChina is said to have a market cap of $1 trillion. But only 14 per cent of its stock is traded, of which 11.5 per cent is listed in Hong Kong. The other 86 per cent is held by the Chinese Government

— When 2.1 per cent of the company’s stock listed in Shanghai on Monday, heavy demand pushed the share to $5.90 on the first day, far above the value in Hong Kong, which closed at $2.31. If the value of the state’s holding is calculated using the Shanghai value, it is worth about $955 billion but if the Hong Kong price is used, the stake would be worth about $396 billion

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