By Scott Murdoch and Sophie Yu

HONG KONG/BEIJING (Reuters) -JD Logistics Inc shares closed 3.3% higher in their first session on the Hong Kong Stock Exchange Friday, after trading up by as much as 18.3% on debut.

The company, spun out from Chinese e-commerce firm JD.com, priced its shares at $HK40.36 each and the stock closed at HK$41.70.

They hit a peak of HK$47.75 but then steadily gave up those gains.

The Hang Seng closed 0.04% higher after trading higher for most of the day.

JD Logistic’s 15% drop from its peak to closing price was the result of intense retail investor activity late in the day, according to Kingston Securities executive director Dickie Wong.

The company’s securities filings showed the retail portion of the IPO was oversubscribed 715 times, making it one of the hottest IPOs of recent times in Hong Kong.

“There was a lot of retail investor interest in this deal so when those people see the stock is starting to fall they will start to divest because they want to take their profits,” Wong told Reuters.

There were 1.36 million individual applications for stock in the deal but only 289,004 – or one fifth – of those received any shares in the IPO, regulatory filings showed.

JD Logistics is being watched closely as an indicator of appetite for big IPOs in Hong Kong and of companies closely connected to China’s internet economy, which is facing antitrust scrutiny.

Speaking at a briefing in Beijing on Friday to mark the listing, JD Logistics CEO Yu Rui said the scrutiny by regulators would bring it more opportunity as it was differentiating itself by spending on technology.

“We are going to use the funds raised from the IPO to further improve our networks, including in the lower-tier and suburban areas in China, and the infrastructure of the overseas markets,” Yu said.

JD Logistics’ successful IPO and stock listing comes after the planned IPO of financial technology firm JD Digits, an affiliate of JD.com, was terminated last month.

The IPO is the second largest in Hong Kong in 2021 and only the third to raise more than $1 billion in the city this year.

The other two were Kuaishou Technology, which leapt 161% on debut in January, and Linklogis Inc, which gained 9.9% in April on opening day.

Shares of JD Logistics’ close rival S.F. Holding Co Ltd have fallen about 20% this year after vaulting 137% last year. It has a market value of about $50 billion.

($1 = 6.3682 Chinese yuan renminbi)

(Reporting by Scott Murdoch in Hong Kong and Sophie Yu in Beijing; Additional reporting by Donny Kwok in Hong Kong; editing by Muralikumar Anantharaman and Jason Neely)

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