Beijing Enterprises float set to flourish with government backing

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.