* Stock trades as high as 15.25 yuan vs 3.60 yuan IPO price
* Huge valuations go well beyond expected 2009 growth
* Bodes well for coming IPOs, may be harmful to market
* Reforms to better allocate IPO shares shown ineffective (Updates with closing prices, more analyst quotes)
By Lu Jianxin and Edmund Klamann
SHANGHAI, July 27 (Reuters) - Sichuan Expressway's roaring debut on Shanghai's stock exchange on Monday, with a tripling in price, bodes well for bigger listings ahead but raises the spectre that excess speculation could destabilise the market.
Sichuan Expressway's $264 million debut, the first in Shanghai since a 10-month IPO ban was lifted last month, signals a strong start for the expected launch of trade on Wednesday for China State Construction Engineering Corp, which raised $7.3 billion in the world's largest IPO this year.
Its local-currency A shares kicked off trade at 7.60 yuan and shot up to 15.25 yuan by the afternoon, well above the IPO price of 3.60 yuan and triggering two trading halts. They closed at 10.9 yuan after nearly 90 percent of the shares listed on Monday changed hands.
A Reuters survey of six industry analysts last week predicted the shares would trade around 5.0 yuan, up 40 percent from their offering price, after the firm's IPO raised 1.8 billion yuan ($264 million). Even the highest forecast in a wide range was only 6.0 yuan.
"It's more than crazy. It's pure stir-frying (speculation)," said analyst Chen Shaodan at Beijing-based Stockfly Securities.
"Apparently, there is too much liquidity in the system," she said, adding that Sichuan Expressway's valuations were now far ahead of its fundamentals and the stock could suffer successive falls in coming days, dragging the market down with it.
At the closing price, the toll road operator's A shares were worth 3.4 times its Hong Kong-listed H shares.
Mainland-listed A shares of dual-listed Chinese firms often enjoy big premiums over their Hong Kong-listed counterparts, partly due to a lack of investment channels in the mainland, but the average premium was only at 41 percent on Monday.
China's authorities have stepped up approvals of IPOs in hopes of cooling the stock market with additional supplies of equity, as a surge in the key index of more than 85 percent this year has sparked worries that a price bubble may be forming.
HUGE VALUATIONS
Sichuan Expressway's Shanghai IPO earlier this month had drawn strong investor interest and was 414 times subscribed in the key retail portion.
The issue of 500 million yuan-denominated A shares, or 16.35 percent of its expanded share capital, is mainly to purchase expressway assets from its controlling shareholder.
Sichuan Expressway's Shanghai IPO was priced at a relatively low 14 times its 2009 earnings per share (EPS) of 0.25 yuan forecast by analysts, but its listing debut put its A-share valuation far above the industry average.
"The listing price has gone far beyond the firm's prospects in 2009, if we are cautious and do not factor in several years of corporate earnings growth," said expressway industry analyst Xu Xiang at Northeast Securities in Shanghai.
Xu and other analysts note that Sichuan, among China's central and western provinces where the expressway network lags far behind coastal areas, has substantial growth potential.
But a 10.9 yuan closing price gives the firm a forecast price earnings (PE) ratio of 44 times, compared with Monday's average of 19 times for about 15 expressway stocks listed on the mainland's Shanghai and Shenzhen bourses and much more expensive than a global average of 15 times, according to Reuters Research.
That price also gives Sichuan Expressway a market capitalisation of $4.9 billion, ranking it the second largest among the 15 mainland-listed expressway companies after the sector leader Jiangsu Expressway, which operates roads serving China's financial and commercial hub in Shanghai.
Galaxy Securities was the lead underwriter for the issue. ($1=6.830 Yuan) (Editing by Jean Yoon)