SHANGHAI (Reuters) - A move by Sinohydro Group, China’s largest builder of dams, to cut the size of an initial public offering in Shanghai bodes ill for other mainland IPOs in the pipeline as a deepening debt crisis in Europe rattles global markets.
The builder of the Three Gorges Dam, the world’s largest hydropower project, may raise up to 14.4 billion yuan ($2.3 billion) after setting a price range of 4.50-4.80 yuan per share for the issue. It had originally sought to raise 17.3 billion yuan from the sale.
Sinohydro will sell only 3 billion yuan-denominated shares in the offering, compared with up to 3.5 billion shares planned initially.
Despite the cut, the Sinohydro IPO will still be the largest mainland IPO so far this year.
“The capital market is under immense pressure. There is not enough demand,” Sinohydro Chairman Fan Jixiang told investors in an online roadshow on Monday. “We must take into consideration liquidity conditions in the market as well as the actual value of the company, so we proactively cut the size of the issue.”
Apart from Sinohydro, at least two companies are planning to raise billions of dollars from the mainland stock market later this year.
China Communications Construction Co Ltd (1800.HK), the country’s top port builder, plans to raise 20 billion yuan from an offering in Shanghai. The China Securities Regulatory Commission will review China Communication Construction’s IPO application on September 28.
Shaanxi Coal Industry, a coal mining major headquartered in Xi‘an, in the northern Chinese province of Shaanxi, plans to raise about 17.3 billion yuan in Shanghai, the company said last month.
The busy IPO pipeline has weighed heavily on the stock market as fund managers sell shares on the open market to raise money for the IPOs.
The benchmark Shanghai Composite Index .SSEC has fallen 13 percent so far this year.
“Liquidity in the market is already very tight because of government tightening and there’s no sign that the policy will be loosened anytime soon,” said Zheshang Securities analyst Zhang Yanbing in Shanghai. “Companies need to adjust their plans to reflect market realities or they will have a hard time selling their shares.”
China has raised interest rates and the required reserve ratio for banks multiple times this year as inflation hit a three-year high.
Sinohydro will announce the final pricing for the Shanghai issue on September 28. The company would consider selling shares in Hong Kong after the Shanghai listing, Fan said. “A listing abroad can help raise the company’s profile on the international market. The company will plan an H-share listing in the future depending on development needs.”
($1 = 6.389 yuan)
Reporting by Soo Ai Peng; Editing by Chris Lewis