Sinohydro plans to raise 17b yuan in shanghai IPO
Sinohydro Group, a state-owned builder of dams and hydropower plants, plans to launch the mainland's largest initial public offering so far this year, expecting to raise 17.3 billion yuan (HK$20.9 billion) despite the weak market.
The IPO application from the country's leading dam builder will be reviewed by the China Securities Regulatory Commission on Friday.
The review committee of the CSRC has never rejected an IPO by a major state-owned company.
One investment banker said the regulator normally carefully reviewed applications from large state-owned firms before such hearings.
According to its preliminary prospectus, Sinohydro aims to raise the funds or future projects by floating 3.5 billion shares, or 35 per cent of its enlarged capital.
Sinohydro's upcoming IPO surprised investors and analysts, who expected the regulator to be cautious about approving new listings in a sagging market.
The benchmark Shanghai Composite Index has lost 3.7 per cent this year after a decline of 14.3 per cent last year. The A-share market has been dominated by small listings this year after it became the world's largest IPO market in 2010.
In the past, the CSRC has slowed IPO approvals in a bearish market to stop fresh equities from draining market liquidity. However, the regulator has continued to approve a large number of IPOs this year in what the CSRC chairman, Shang Fulin, described as 'efforts to let market forces rule'.
Buyer interest in IPOs declined significantly this year as more retail investors were left without gains after the shares listed.
Nanning Baling Technology last month was forced to halt its IPO process after only 19 institutions participated in the price consultations, one fewer than the minimum 20 institutional investors required.
'A consensus prediction among investors is that the market is short of funds and most of them are looking to cash out rather than hunt for bargains,' Shenyin Wanguo Securities analyst Qian Qimin said.
Sinohydro will set a final price on its IPO shares following price consultations with institutional investors.
Based on the targeted proceeds of 17.3 billion yuan, the company would sell the 3.5 billion shares at 4.95 yuan a piece, or 11.3 times its 2010 earnings.
'Sinohydro's IPO reflected the government's determination to develop hydropower projects,' Dazhong Insurance fund manager Wu Kan said. 'It doesn't necessarily mean the market will see more large-size IPOs.'
Shang said earlier this year that Beijing was edging closer to create the international board at the Shanghai Stock Exchange, a long-awaited liberalisation that would allow foreign companies to offer yuan- denominated A shares.
His remarks heightened speculation that the board would be launched within this year.
The State Council, which has the final say on the issue, has yet to give a go-ahead to the CSRC to establish the board.