HK’s IPO mar­ket tak­ing off

China Daily (Hong Kong) - - BUSINESS - By GAO CHANGXIN in Shang­hai gaochangxin@chi­

Hong Kong’s IPO mar­ket is see­ing a re­vival, as new deals are flood­ing the mar­ket af­ter the main­land’s plan to over­haul the econ­omy was an­nounced.

Bad- debt man­ager China Cinda As­set Man­age­ment Co Ltd will soon lose its ti­tle as Hong Kong’s big­gest IPO this year, which it grabbed days ago, to China Ever­bright Bank Co Ltd, which launched a $2.8 bil­lion of­fer­ing on Tues­day.

Cinda, one of the four ma­jor bad-debt man­agers es­tab­lished in 1999 to save then-fal­ter­ing State- owned lenders, said on Wed­nes­day that it raised HK$18.5 bil­lion ($2.4 bil­lion) by is­su­ing 5.3 bil­lion shares at HK$3.58 each, the top of the price range. The shares will start trad­ing on Thurs­day.

Funds from the of­fer­ing will boost bad-debt man­age­ment, fi­nan­cial in­vest­ments and as­set man­age­ment, it added.

The an­nounce­ment came af­ter China Ever­bright Bank, the lend­ing unit of State-owned China Ever­bright Group, said in its prospec­tus that it plans to raise up to $2.8 bil­lion by of­fer­ing 5.08 bil­lion new shares at HK$3.83 to HK$4.27 apiece. The coun­try’s 11th- largest lender is join­ing its main­land peers in a fundrais­ing spree ahead of new reg­u­la­tions that re­quire lenders to hold more cap­i­tal as a buf­fer to risks.

Ever­bright’s 19 cor­ner­stone in­vestors in­clude Ocean For­tune In­vest­ment Ltd, Ever Ideal Ltd, Pru­den­tial Insurance Co of Amer­ica, Sun Life As­sur­ance Co of Canada and Sinochem In­ter­na­tional (Over­seas) Pte Ltd. Those in­vestors pledged to buy shares worth $1.74 bil­lion, rep­re­sent­ing about 70 per­cent of the value of the IPO.

Cor­ner­stone in­vestors are usu­ally big in­sti­tu­tions that prom­ise large share pur­chases in ad­vance and prom­ise to hold them for at least six months.

The two ma­jor of­fer­ings are help­ing Hong Kong’s IPO mar­ket re­gain vigor. In­vestors were wor­ried that the city might see last year’s doom ex­tended, af­ter it missed out on the huge of­fer­ing by Alibaba Group Hold­ing Ltd ear­lier this year. But a slew of other of­fer­ings saved the mar­ket from another lack­lus­ter year.

So far, about $12 bil­lion has been raised in Hong Kong, beat­ing last year’s $11.4 bil­lion. That’s still a long way be­hind the peak in 2010, when around $59 bil­lion was raised.

Last week, a $ 200 mil­lion deal by Fu Shou Yuan In­ter­na­tional Group Ltd, a main­land­based com­pany that man­ages burial grounds, also of­fered some ex­cite­ment to the mar­ket. In­vestors showed strong in­ter­est in the of­fer­ing as they see great po­ten­tial for China’s fu­neral in­dus­try amid the coun­try’s ag­ing pop­u­la­tion.

In Novem­ber, 16 IPO ap­pli­ca­tions were filed to Hong Kong Ex­changes and Clear­ing Ltd, aim­ing to raise $6 bil­lion.

Wang Jian­hui, chief econ­o­mist at South­west Se­cu­ri­ties Co Ltd, said that the IPO mar­ket is ben­e­fit­ing from the strong re­form sig­nal sent by Bei­jing at last month’s Third Plenum of the 18th Cen­tral Com­mit­tee of the Com­mu­nist Party of China. The meet­ing mapped out en­cour­ag­ing changes for the world’s sec­ond-big­gest econ­omy and has boosted global sen­ti­ment to­ward in­vest­ment in China, he added.

Whether mo­men­tum can be kept in the Hong Kong mar­ket is doubt­ful, though, as the main­land plans to snap a 14-month hia­tus and re­open the gates for IPOs in Jan­uary.

Se­cu­ri­ties reg­u­la­tor pledged on Nov 30 to al­low at least 50 com­pa­nies to float shares by Jan­uary next year. More than 760 IPO can­di­dates are now in the pipe­line, and the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion said it will take al­most a year to as­sess all of them.

“(The re­sump­tion of IPOs on the main­land) will have some im­pact, but not big-time. An IPO is not just about rais­ing money, and Hong Kong of­fers a lot more,” said Zhang Qi, a stock mar­ket an­a­lyst at Haitong Se­cu­ri­ties Co Ltd.

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