SHANGHAI - Shares of Chinese dam builder Sinohydro Group rose 17 percent on their Shanghai debut on Tuesday as investors piled in to profit from an attractive valuation, boding well for other big China fundraisings in the pipeline.

The main builder of the Three Gorges Dam, the world's largest hydropower project, raised $2.1 billion in the Chinese mainland's biggest IPO this year, but priced its shares at a significant discount to peers in the face of volatile equity markets.

Investors who missed out on the IPO moved to snatch up Sinohydro's shares in the secondary market, pushing it up as much as 38 percent from the IPO price of 4.50 yuan (71 US cents) in the morning session, a jump that prompted a half-hour suspension of trading under stock exchange rules.

After the resumption of trading, the stock pared gains to close at 5.28 yuan, up 17 percent.

"It's speculative money chasing a relatively cheap and eye-catching stock in a sluggish market where there's hardly any chance to make money," said a fund manager at Aegon-Industrial Fund Management Co, who declined to be identified.

"Sinohydro priced its IPO in a very weak market so some investors may think it's a bargain, but the big fluctuations could only be driven by speculation."

Sinohydro is best known as the main builder of the Three Gorges Dam on the Yangtze River, a colossal 22.5 gigawatt project completed in 2005.

The company is seen as a major beneficiary of China's push to build up its hydropower capacity. China has budgeted 2 trillion yuan for hydropower and water infrastructure projects over the next five years.

Some traders said they saw a large amount of retail buying, as individual investors who may have missed out on the IPO sought to profit from the relatively low price.

The broader Shanghai market, which has endured a turbulent ride in recent months, was down 2.3 percent.

Beijing announced measures last week to bolster financial stocks and support small and medium-sized enterprises (SMEs), with China's sovereign wealth fund buying shares in the big four banks, helping trigger a rebound from two-and-half-year lows.

Weakness in China's stock market, which has fallen more than 10 percent so far this year due to fears of an economic slowdown and the eurozone debt crisis, has forced many Chinese companies to postpone or downsize their IPOs.

A similar story in Hong Kong, the world's biggest IPO market for the last two years, has also pushed back some companies' fundraising plans there.

In one of the most high-profile cases, Sany Heavy Industry Co last month postponed its plan to raise as much as $3.3 billion through a Hong Kong listing.

Reuters