Bocom, Cosco and Shenhua tap Hong Kong's near-dormant market for new issues with deals of more than US$1.5b each
Pricing will always play a key factor in determining the success or failure of an initial public offering.
With three mainland companies tapping Hong Kong's near-dormant listing market with deals worth more than US$1.5 billion each this month, pricing may prove to be more important than ever.
China Shenhua Energy, Bank of Communications (Bocom) and Cosco Holdings will face not only a challenging equity market but also the prospect of slowing economic growth in China as interest rates rise and Beijing continues to curb investment in certain sectors. In such an environment, listing candidates will have to compensate investors by offering more attractive valuations, fund managers say.
'Six months ago, you could sell anything, but it's not the same story any more as the data is pointing to an economic slowdown and earnings growth looks much more modest,' one fund manager said. 'The level of investor interest will really depend on the pricing.'
Still, the offers are attracting attention in a market that has seen only 10 offerings this year, against 23 in the first half last year. And none more so than Bocom, the first mainland state-owned bank to seek an overseas listing.
The bank and its lead underwriters, Goldman Sachs and HSBC, will be stressing its role as a first mover in terms of bank reform in China after last year's state re-capitalisation and non-performing loan sales.
