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2 Mainland set to overtake
Hong Kong in IPOs By
Olivia Chung
capitalization.
However, after the Chinese government
reformed its stock markets, most of the 1,300-plus
companies listed on the Shanghai and Shenzhen
bourses disposed of non-tradable shares by the end
of last year.
At the same time, in
response to complaints that domestic investors
were unable to invest in quality companies that sold
shares overseas, Beijing
lifted the ban on domestic IPOs on May 18.
Shares in China CAMC Engineering Co, the
first company to go public after the ban was
lifted, jumped more than fourfold on its first day
of trading in Shanghai last June. BOC achieved a
gain of 31% on the day of its A-share IPO in July.
As investor confidence returns, China's
stock markets can be used by Beijing to channel
more of its $2 trillion in household savings into
the stock market, which will alleviate the burden
on China's banks.
For the red-chip and
H-share companies, going back home to list now is
an alternative way to raise more funds as the
A-share market has been bullish in the past year
on expectations of the yuan appreciation and
confidence in China's strong economic growth.
The Shanghai Composite Index gained 3.72%
to close at 2,807.804 points, the first time the
benchmark closed above the 2,800-point level, on
Tuesday when China Life made its successful debut
on the Shanghai stock market. Turnover reached
85.6 billion yuan ($10.95 billion) on that day,
representing a 19.68% increase over the previous
day's trading volume.
With China Life's
successful A-share debut, Ping An Insurance,
another mainland insurance giant listed in Hong
Kong, plans to sell at most 1.15 billion A-shares,
while two other Hong Kong-listed mainland
financial firms - Bank of Communications and China
Construction Bank - have also announced A-share
listing plans for this year.
Meanwhile,
Hong Kong-listed Chinese telecom giants such as
China Mobile, China Telecom and China Netcom all
plan to return to mainland stock markets seeking
fresh capital to build infrastructure for their 3G
(third generation) networks. A fourth player,
China Unicom, is currently the only major
telecommunications operator that is listed on both
overseas and mainland stock markets.
With
licenses for the so-called 3G mobile-telecom
technology expected to be announced early this
year, China's major telecommunications operators
may need to raise as much as a 100 billion yuan to
build and maintain the required new networks. The
new 3G mobile-phone service will provide
multimedia services including voice, data, video
and wireless Internet access.
A
spokesperson for China Mobile, the largest Chinese
mobile-telecom operator, said it is the company's
intention to raise funds on the mainland market,
but there is not a concrete timetable for an IPO.
"China's securities regulator is creating
favorable conditions for red chips to come home,"
an official with the CSRC was quoted as saying by
Xinhua News Agency.
Listing regulations do
not allow overseas incorporated companies to list
directly on the mainland. "It is hard to change
the regulations under the current circumstances,
but red chips can find a back door," said Li
Yongsen, a professor with Renmin University of
China.
Once the H-shares and red chips
return, they are expected to lead the markets'
growth in 2007, analysts said.
Another
outcome is that China will become a bigger market
for IPOs than Hong Kong this year, an expert at
PricewaterhouseCoopers said. PwC Assurance partner
Richard Sun predicts that total capitalization of
IPOs in Shanghai and Shenzhen will reach 200
billion yuan this year, beating Hong Kong's
expected 150 billion yuan.
PwC attributes
the predicted rise to the expected increase in
mainland companies seeking a dual listing in Hong
Kong and China in 2007 as only about 50% of
H-share companies were listed on mainland bourses
as of the end 2006.
Ernst & Young also
predicted that IPO proceeds in Shanghai will
surpass - or at least be equal to - those in Hong
Kong to reach 280 billion yuan this year,
propelled by the issue of A-shares by companies
with listed H-shares in Hong Kong.
Olivia Chung is a senior Asia
Times Online reporter.
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Asia Times Online Ltd. All rights reserved. Please
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