Investor reaction to the Hong Kong listing of Sinopec, China's largest producer of refined petroleum and petrochemical products, was lukewarm. The stock closed yesterday at HK$1.54, down five cents, or 3.15 per cent, from its issue price of HK$1.59.
But even so, Sinopec's US$3 billion global offering represents a milestone in the history of China's state-sector reform programme. With the listing, the amount of money raised this year by key state-owned enterprises (SOEs) through global offerings has surpassed US$10 billion - equivalent to about 25 per cent of all foreign direct investment absorbed by China last year.
PetroChina, the mainland's largest oil exploration company, led the listings parade with a US$2.9 billion global offering in April. China's No 2 telecommunications company, China Unicom, followed in June, raising US$5.6 billion. The US$3 billion raised by Sinopec in its global offering is just the beginning. In the next four to five years, it will build four ethylene joint ventures requiring investment of US$10.5 billion.
Sinopec's foreign joint-venture partners will fund about half of this investment - a pretty good haul for a company with a limited track record. Sinopec has existed in its present form for only two years.
Prior to an industry restructuring ordered by the central government in 1998, Sinopec was China's monopoly refiner and petrochemicals company, while PetroChina dominated the mainland's oil-exploration sector.
The restructuring saw Sinopec swap its refineries and petrochemical complexes in north and west China for PetroChina's oilfields in the south and east. This created two vertically integrated geographic monopolies, with the intention of fostering greater competition in the industry.