Greater China firms brave markets with $11 billion in IPOs
HONG KONG (Reuters) - Companies in Greater China are lining up to sell shares in initial public offerings in coming months, braving jittery markets with $11.2 billion in deals.
Issuers are betting the steep rebound in Hong Kong and Chinese markets in the past month might signal renewed appetite for offerings that would provide funding for expansion and takeovers.
Hong Kong's benchmark Hang Seng index .HSI has surged nearly 18 percent since October 4, while the Shanghai Composite Index .SSEC is up about 6 percent, compared with a 2.8 percent gain in the MSCI World index.
China Railway Materials Commercial Corp., Sinochem Corp. and Jiangsu Phoenix Media & Publishing Corp Ltd unveiled plans over the past few days to raise about $8.2 billion in IPOs in Shanghai. In Hong Kong, Chow Tai Fook Jewellery received the go-ahead from the exchange for its offering, valued at up to $3 billion.
"Some of these companies have been ready to float for a long time and are trying to squeeze a deal before the end of the year as they see a bit of a window," said Philippe Espinasse, a former investment banker with Nomura and UBS in Hong Kong and author of 'IPO: a Global Guide'.
"If you don't go now, you're probably stuck for another couple of months until you can do something. Effectively you might be stuck until February."
The multi-billion-dollar listing plans are music to the ears of investment banks in the region, faced with a slowdown in issuance and plunging underwriting fees.
ECM ISSUANCE, FEES SLUMP
Equity capital market issuance in Asia-Pacific has tumbled to $172.4 billion so far this year, compared with $259.1 billion in the same period last year, according to Thomson Reuters data.
The decline has been even more severe in the fourth quarter, with issuance down to $7.9 billion through early November, from $60.6 billion in the same period of 2010.
Overall ECM fees has fallen 18 percent to an estimated $4.3 billion so far this year because of the decline in issuance. Just in the fourth quarter, usually the busiest for issuance, fees sank 84 percent to $205.9 million.
Undeterred by the downturn in markets, Chow Tai Fook, controlled by New World Development Co Ltd (0017.HK) tycoon Cheng Yu-tung, will start pre-marketing its IPO on Monday, after its listing was approved by the Hong Kong stock exchange, IFR reported.
Jiangsu Phoenix Media, one of China's biggest publishers, said on Friday that it would begin a roadshow for its 2.8 billion yuan Shanghai IPO, using the funds to expand its sales network, book publishing and e-commerce operations.
In a filing posted on the environment ministry's Web site on Thursday, China Railway Materials said it plans to raise 14.7 billion yuan ($2.3 billion) in its IPO to fund 27 projects. In a separate filing on the same Web site, Sinochem Corp said it plans to raise up to 35 billion yuan to finance a new refinery project.
Companies with operations that impact the environment, such as miners and oil refinery operators, first need to obtain clearance from the environment ministry before seeking approval from the China Securities Regulatory Commission (CSRC) for IPOs, a process that could take months.
"The CSRC prioritizes what goes to market. What seems to be getting the green light are large, liquid issues," said Espinasse. "I don't think these deals are necessarily imminent, the fact that they make an announcement doesn't mean they will come this year."
($1 = 6.346 Chinese Yuan)
(Additional reporting by Kazunori Takada in SHANGHAI; Editing by Muralikumar Anantharaman)