The Financial Times leads
its China reportage today with figures from Dealogic, a data provider, that show stock exchanges in New York, London and Hong Kong have been left trailing in the wake of mainland bourses in terms of capital raising following PetroChina’s record US$8.9 billion offering last week.
PetroChina took the total raised this year through mainland Chinese listings to US$61 billion. This is more than twice the capital raised in Hong Kong, the default vehicle for Chinese offerings in recent years, and takes the mainland far beyond the traditional powerhouse bourses of the US, which have raised US$51 billion this year, and the UK, which have helped pour US$43 billion into the coffers of public companies.
According to Dealogic, eight of China’s 10 largest ever mainland initial public offerings (IPOs) have occurred this year, including China Shenhua Energy and China Construction Bank, which raised US$8.8 billion and US$7.7 billion in September, respectively. Other hefty IPOs are waiting in line, including an offering by China Railway Group, a unit of China Railway Engineering Corp, which is likely to raise up to US$4 billion in a combined Shanghai and Hong Kong listing next year.
However, government efforts to persuade leading Chinese corporates to list at home are not entirely a death knell for Hong Kong, although the days when it was the listing vehicle of choice for China corporate seem to be over. In the same story, the FT previews Tuesday’s landmark US$1.5 billion IPO in Hong Kong of Alibaba.com, China’s leading online business-to-business marketplace.
What is remarkable about the listing is that it marks the first time a large Asian technology company has shunned a primary listing on Nasdaq in favour of a regional exchange. Asian technology companies have typically listed on Nasdaq because of greater investor liquidity and understanding, but Alibaba.com’s decision to break new ground has not seemed to hurt it. The IPO has been meet with unprecedented investor frenzy; domestic retail and global institutional investors have put their hands out for US$160 billion worth of shares, which were priced last week at HK$13.50. Successful subscribers are in for a windfall; activity in Hong Kong’s “grey” market last week suggested shares could rise at least 50% when trading begins.
The paper also reports
that regulators have effectively frozen a proposal to allow mainland citizens to buy shares in Hong Kong through an account with the Bank of China’s branch in Tianjin, the northern port city.
The so-called money through-train scheme, which was announced in August by the State Administration of Foreign Exchange (SAFE), a body under the central bank, sparked an immediate spike in the territory’s share prices but also caused concern among securities and banking regulators on the mainland. They said they had not been properly consulted, and slammed SAFE for not properly thinking the implications through, including the risk that billions of dollars in funds could flee local share market and lending institutions, putting both at risk.
Wen Jiabao, the premier, appears to have come to the rescue in a uniquely Chinese way. By attaching four conditions to the final approval for the scheme – necessary laws and regulations governing the outflow of funds, assessing the impact on the Hong Kong stock market, educating investors on the risks of investing, and seeking the opinions of financial regulators – all of which are so open-ended that Beijing could take months, if not longer, to permit it to go ahead, he has effectively scotched the plan.
Read Wang Xiangwei’s take on the scheme in the South China Morning Post
In other news:
A consortium comprising China National Chemical Corporation (ChemChina) and private equity groups Blackstone and Fox Paine are likely to win support from Nufarm, the Australian agricultural chemicals maker, for its cash takeover bid worth up to US$2.8 billion. Nufarm said it would agree to the deal, worth A$17.55 a share including a proposed 30 cent dividend, in the absence of a better offer and subject to an independent experts report. “As contemplated, the transaction would combine Nufarm with certain agricultural chemical businesses of ChemChina to create the global leader on off-patent crop protection,” Kerry Hoggard, Nufarm chairman, told the FT
. Blackstone has a 20% stake in China National Bluestar, a subsidiary of ChemChina, showing the importance of a China link-up in the mainland's private equity dealings.
China National Heavy Duty Truck Co, the country's third-largest heavy truck maker, kicked off its pre-marketing to raise up to US$1 billion in a Hong Kong initial public offering, a source familiar with the deal told Reuters
Monday. The company, also known as Sinotruck, has set up a truck manufacturing joint venture with Sweden-based Volvo, the world's second-largest truck maker. JP Morgan and China International Capital Corp are sponsoring the offering.
The China Securities Regulatory Commission urged fund management companies to strengthen liquidity risk management, Dow Jones
reported, citing a report over the weekend by the official Xinhua News Agency. The regulator asked fund management companies to take account of the risks in allocating a large part of their funds in single stocks, and to "firmly establish the concept of value investing," Xinhua said. China's fund management companies had RMB3.31 trillion in net assets at the end of October, up 10% from the end of September.