By Hyunjoo Jin and Dahee Kim
SEOUL, Dec 8 (Reuters) - Shares of South Korean low-cost carrier Jin Air Co Ltd made a weak market debut on Friday, as concerns about valuation and oil prices offset hopes of China recovery.
Shares of the affiliate of South Korea's top carrier Korean Air Lines Co Ltd ended at 28,850 won($26.42) each, down 9.3 percent from its IPO price of 31,800 won and up 0.7 percent from its opening price of 28,650 won.
Jin Air, in which Hanjinkal, the holding company of Jin Air's parent Hanjin Group, is a major shareholder, priced the IPO of its 12 million shares, including 3 million new shares, at the top of its indicative range, raising about 381.6 billion won.
South Korean low-cost carriers (LCCs) have achieved exponential growth in recent years, as cheap travel fares fuelled demand from South Koreans and Chinese tourists.
China has partially lifted its ban on group tours to South Korea, in a sign of thawing relations between the nations that have been locked in a year-long diplomatic standoff.
However, rising oil prices threaten to increase fuel costs and lower margins for South Korea's no-frills carriers vying to offer cheaper tickets with more players joining the fray.
"I think South Korean LCCs have more room for growth, with China easing their travel ban and solid domestic demand. But I think the valuation of Jin Air is expensive compared with market leader Jeju Air," said Kim Sung-soo, fund manager, LS Asset Management.
Analysts said Jin Air can leverage its affiliate Korean Air to lease aircrafts, offer long-haul services and reduce maintenance costs.
Shares of Jeju Air were slightly changed at 35,050 won, while Korea Air Lines closed 0.8 percent down and Asiana Airlines finished down 1.8 percent. Meanwhile, Hanjinkal ended 4.5 percent down.
Jin Air posted an operating profit of 78 billion won from January to September, already exceeding its 2017 operating profit of 52.3 billion won.
The carrier plans to use IPO proceeds to operate a total of 38 aircraft by 2020 from 24, and expand its routes to 79 from 52.
($1 = 1,091.9200 won)