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UPDATE 2-China's oldest investment bank CICC jumps in HK trading debut
November 9, 2015 / 2:18 AM / in 2 years

UPDATE 2-China's oldest investment bank CICC jumps in HK trading debut

* Shares supported by China’s decision to re-open IPO markets

* CICC IPO raised $811 mln in Hong Kong, priced at the top (Adds CICC comments, China IPO activity, upcoming HK listings)

By Elzio Barreto

HONG KONG, Nov 9 (Reuters) - China International Capital Corp (CICC) shares jumped up to 11 percent in their Hong Kong debut on Monday, as investors snapped up China’s oldest domestic investment bank on optimism over mainland equity activity despite this year’s market rout.

CICC’s strong start was helped by China’s decision on Friday to resume IPOs after a four-month halt, a move likely to boost investment banks’ revenues, and sets a positive benchmark for a host of other companies queued up to list.

“The timing of the reopening had been a closely monitored exercise by the market. There are hundreds of companies keen to go public,” said Ringo Choi, Asia-Pacific IPO leader at consulting firm EY in Hong Kong.

“This is a milestone for them, showing that the market has stabilised.”

CICC stock surged as high as HK$11.38 and traded at HK$11.34 in mid-morning, compared with a 0.4 percent gain in the benchmark Hang Seng index. The $811 million initial public offering was priced at HK$10.28, the top of its marketing range.

“The price of CICC is good, as we expected,” CICC Chairman Ding Xuedong said at the listing ceremony as bank employees cheered every time the stock price ticked higher. Ding is also chairman and CEO of China’s sovereign wealth fund, CIC.

China’s major stock indexes opened up after regulators said they would allow initial public offerings to resume, with CICC a stand-out performer.

The bank’s debut will reassure investors rattled by China’s market turmoil and economic slowdown, with full-year growth set to slip to a 25-year-low of under 7 percent.

Established in 1995 as a joint venture between China Construction Bank, Singapore sovereign wealth fund GIC Ltd and Morgan Stanley, CICC will use the funds raised from the IPO to expand equity sales and its trading and wealth management businesses, as well as international subsidiaries.

It counts global private equity firm KKR & Co and TPG Capital Management among its shareholders.

BRISK ACTIVITY

Domestic investment banks like CICC and rivals CITIC Securities and Haitong Securities are likely to be the biggest beneficiaries from the resumption of IPOs in Shenzhen and Shanghai, as homegrown firms underwrite the vast majority of those deals.

Underwriting IPOs and other equity deals accounts for about half of investment banks’ revenue in Asia, compared with 20 percent in the United States and 19 percent in Europe.

The CICC IPO comes on the heels of two other large offerings in the city, underscoring an upswing in equity activity that investment bankers are counting on to boost revenue in Asia.

Companies in mainland China had raised $23.4 billion in IPOs in 2015 through-mid June before regulators suspended deals, far surpassing the $13.2 billion in all of 2014, Thomson Reuters data showed.

The halt in deals over the mid-year period mirrored a similar move late in 2012 that closed the Chinese IPO market for more than a year, underscoring how unpredictable mainland China equity capital markets can be.

Deal activity has been particularly brisk in Hong Kong, with distressed debt manager China Huarong Asset Management Co raising $2.3 billion in an IPO and China Reinsurance (Group) tapping markets for $2 billion in recent weeks.

Snack maker Dali Foods Group Company Ltd is pricing its up to $1.3 billion IPO on Friday and China Energy Engineering Corp Ltd’s $2 billion deal is expected later in November, bankers have said.

The retail portion of CICC’s IPO accounted for 4.7 times the number of shares on offer, the firm said on Friday. The institutional tranche was “significantly over-subscribed,” CICC said.

Reporting by Elzio Barreto; Additional reporting by Denny Thomas; Editing by Edwina Gibbs and Stephen Coates

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