Market surge prompts firms to revive IPOs
George Chen, May Chan and Daniel Ren in Shanghai
Investment bankers are trying to revive at least four substantial initial public offerings that were called off late last year because of weak market sentiment as the market is showing signs of recovery.
The four companies include Haitong Securities and XCMG Construction Machinery.
Shanghai Fosun Pharmaceutical and car dealer Yongda Auto were also reviving their listing plans, financial industry sources said yesterday.
Both Haitong and XCMG, also known as Xugong, now aimed to go public in April or May and the formal pre-marketing work, which is usually a good opportunity to test investor appetite for new offerings, could be launched by their banks next month, the sources said.
Fosun Pharmaceutical, a subsidiary of the country's largest non-state-owned investment conglomerate Fosun Group, was expected to cut the size of its offering to US$800 million from US$1 billion, and might go on the market in May or June, the sources said.
Yongda, the largest car dealer in Shanghai, was turning to Hong Kong after scrapping its listing plan in Shanghai, the sources said, adding that the company aimed to raise as much as US$600 million.
The Hang Seng Index lost 20 per cent last year amid a worsening debt crisis in Europe and investors' concerns over prospects for the mainland economy.
But the index has gained 14.02 per cent this year amid a global market recovery led by stocks in the United States.
The index yesterday rose 1.54 per cent to close above the psychologically important 21,000-point mark, marking a six-month high.
'If Haitong and Xugong can relaunch their initial public offerings in April or May, I think you can expect more to come after that,' said one of the sources, adding that the two companies would serve as a litmus test of investor appetite.
Haitong, which is already listed in Shanghai, originally aimed to raise up to US$1.7 billion from its proposed Hong Kong listing in December but the plan was shelved at the last minute because of weak response from institutional investors.
XCMG, the mainland's top machinery manufacturer that US buyout group Carlyle tried to buy into, sought to raise about US$1.2 billion through its Hong Kong listing in September.
The sources said neither Haitong nor Xugong wanted to cut the size of their share sales significantly, although this ultimately hinged on market sentiment at the time.
Despite recent massive job cuts by investment banks in Asia as trade dried up, Stanley Li, a financial sector analyst with Mirae Asset Securities, said the brokerage sector should perform well this year, predicting a swift market recovery.
Li believes Haitong's share offer would receive a warm investor response.
Daily turnover on the main board dropped sharply late last year, partly reflecting seasonal factors but also reflecting jittery investors. Turnover on the last trading day of last year shrank to HK$24.5 billion, a three-year low.
However, trading has recently shown signs of revival as investors return to the stock market in the expectation that the euro-zone debt crisis will be resolved soon and that the world's biggest economy will start to recover.
Yesterday's turnover reached HK$76.1 billion, well above the daily average for the past two months.