Unit trust IPO seen at $20b

Exchange Fund Investment (EFI) is expected to offer up to $20 billion of the Government's share portfolio in a unit trust next month in what would be the largest initial public offering (IPO) in Hong Kong, according to sources.

An EFI source declined to confirm the size of the offering, but said the unit trust was expected to prove popular with investors.

The unit trust's IPO was expected to attract one million applications, which would make it the SAR's largest, a source said.

In Hong Kong's most successful IPO to date, Beijing Enterprises Holdings saw an oversubscription of 1,276 times. The issue, with a record 324,000 valid applications, tied up about $238.8 billion.

The EFI's board yesterday decided to launch the unit trust in the middle of next month with a global offering period of one to two weeks.

The unit trust is to be listed on the stock exchange at the end of next month, the source said.

The EFI has submitted a listing application for the unit trust to the stock exchange, and the listing committee could approve it at a meeting next week, the source added.

EFI director Eric Li Ka-cheung confirmed the unit trust was likely to be launched next month, but he refused to comment further.

An EFI source said it had yet to be determined how many shares would be issued.

'We will determine the size of the unit trust according to the number of applications we receive in the IPO,' the source said.

'The EFI would issue more unit trusts every three months afterwards in a bid to dispose of up to $70 billion of the government portfolio.' The EFI source also said the board had yet to fix a unit price for the IPO.

However, he said there would be a range of incentives to attract investors, among them a price discount, tax incentives and a long-term holder bonus.

The Central Registration, controlled by HSBC and Jardine Matheson,was chosen to be the share registrar, the source said.

United States-based State Street was picked to be the trustee for the unit trust, he said.

Sources confirmed the offering would provide an option of using electronic IPO services offered by Hongkong Clearing. The offering would be the first to use this option.

'The Government wants to support the electronic IPO system and to allow [the Central Clearing and Settlement System (CCASS) ] to produce a track record,' the source from the lead-managing syndicate said.

Electronic IPO services, introduced in May, allow investors who have accounts with CCASS to apply for shares by telephone.

The EFI source also said the EFI did not want to see investors queuing up for application forms and refund cheques, a situation that usually happens in popular IPOs.