OpinionSinopec, Galaxy IPOs multiple times covered
Sinopec Engineering and Galaxy Securities have caught a powerfully positive market. The deals are fully subscribed and are poised to trade well
The listings of two large state-owned enterprises have captured sizeable demand from fund managers, breaking the gloom of Hong Kong's long-suffering IPO markets.
China Galaxy Securities (the mainland's sixth-biggest brokerage firm) and Sinopec Engineering (a spin-off from Sinopec) are preparing to raise a combined US$3.6 billion through Hong Kong listings.
Sinopec was opened to public investors on May 10, while Galaxy's public offer started on May 9.
The mood among bankers working on the deal is buoyant: these deals are cruising to an easy success, signalling positive trading gains on debut. Perhaps they will not repeat the 115 per cent first-day gain registered by Tong Ren Tang Chinese Medicine last week, but the offers have clearly caught a wave of positive momentum.
Both entered marketing with ample support from cornerstone investors, who committed to staying in the offer for six months in return for a guaranteed allocation of shares.
The Sinopec and Galaxy IPOs were fully subscribed on the first day they were offered to fund managers. At the time of writing the order book for Sinopec was covered four times, and the book for Galaxy was covered three times. This suggests that both deals will be priced at the top of their indicated ranges.