The recent controversy over red-chip regulations could help the forthcoming initial public offering by Beijing Enterprises Holdings become - as the market widely expects - the hottest red-chip listing of the year. While other red chips have been unsettled by the likelihood of additional China-imposed regulatory obstacles for spin-off or asset injection plans, Beijing Enterprises - set to raise more than $1.2 billion through the issue of 150 million shares next month - is backed by the political clout of its ultimate parent, the Beijing municipal government. It will be the first red-chip to be listed since the flotation by Gitic Enterprises was almost halted last month after the China Securities Regulatory Commission (CSRC) said Gitic had not obtained its approval for its issue. The listing of Chaozhou Industries, majority owned by Guangdong-backed red chip Guangnan Holdings, has reportedly been held up pending approval from the CSRC after originally being scheduled for about a month ago. China's economic tsar Zhu Rongji reportedly has reservations on the strong speculative element behind the recent strong rally in Hong Kong red chips and stocks in China. These reservations are breeding concerns that Beijing's forthcoming red-chip regulations will be more restrictive. Against this backdrop, Beijing Enterprises' float is destined for success. Hoong Yik Luen, head of China research at ING Baring Securities (Hong Kong), said: 'At the end of the day, only a few powerful and well-connected red chips will be able to continue to be the vehicles of asset injections [from their mainland parents].' The 'chosen few' are likely to be those under the direct control of the Beijing and Shanghai municipal governments, Ministry of Foreign Trade and Economic Co-operation, People's Liberation Army and the State Council. 'At the end of the day, it's the power that counts,' Mr Hoong said. The appointment of one of the executive vice-mayors of the Beijing municipal government, Hu Zhaoguang, as the chairman of Beijing Enterprises is already a tell-tale sign about the status of the company. The Beijing government has made it known that Beijing Enterprises will be its only listed conglomerate in Hong Kong. 'Beijing Enterprises will be as good as Shanghai Industrial Holdings, if not better,' Mr Hoong said. 'Beijing, politically, can repeat what Shanghai Industrial can does,' he said, referring to the fact that both cities are under the direct control of the State Council, which allows them higher autonomy. Shanghai Industrial, the commercial arm of Shanghai municipal government, has been on a buying spree and investors' expectations on future asset injection have sent its share price up almost six-fold to about $42.30 since it was listed in May last year. That is an example of the popularity growth of red chips - mainland-controlled companies listed in Hong Kong. Mr Hoong said Beijing also had plentiful asset injection opportunities in the next five years as it needed up to five ring roads and other highways linking the capital to other cities. Haddon Zia, investment manager at Prudential Portfolio Managers Asia, said the pricing of the Beijing Enterprises issue at about 12 to 15 times this year's earnings was attractive compared with about 30 times at which Shum Yip Investment, the listing arm of Shenzhen municipal government, was trading. 'In terms of assets, actually, it's a more interesting story than Shanghai Industrial,' Mr Zia said. Given the positive sentiment towards red chips, Mr Zia expected the counter would easily double its share price soon after the opening. Similar to the listings of Shanghai Industrial and Shum Yip, Beijing Enterprises has garnered support from some big guns, including the Cheung Kong and New World groups. Even the parent of Shanghai Industrial has agreed to take strategic stakes in Beijing Enterprises. Mr Zia questioned the need to take advantage of corporate big names, saying Beijing Enterprises was powerful enough by itself to lure investors. 'I don't think it matters. It's more a gift to the strategic investors,' he said. Alex Ko Po-ming, director of Peregrine Capital - which is a co-sponsor of the Beijing Enterprises issue - agreed Beijing Enterprises was powerful but said the strategic alliance would help the listing by providing stable shareholders. Beijing Enterprises is also relying on the high hopes investors have on future asset injections from their parent companies. Mr Ko said asset injections by red chips would continue as long as the asset boosts helped broaden the earnings base of companies and investors took it well. Some analysts have warned that the 'feel-good' factor has overwhelmed concerns over fundamentals. As a trader put it bluntly: 'Who talks about fundamentals now? What concerns people is whether there are assets to be injected into these red chips.' The trader said government-backed red chips would continue to enjoy support from the bigger inflow of money from China-funded enterprises. 'For the China-funded enterprises, they don't see staking in red chips as risky because they know the mainland situation better than anyone else does,' the trader said.