Shares in Hong Kong-listed Chongqing Iron & Steel jumped 9.49 per cent after the medium-sized mainland steelmaker announced a plan to sell shares in Shanghai next month to fund expansion of its production capacity.
The company plans to issue 350 million A shares, amounting to 20.19 per cent of its enlarged share capital. Based on the company's H-share closing of HK$2.77 yesterday, the deal could raise HK$969.5 million.
Chongqing Iron plans to spend 1.4 billion yuan in the next two years to expand cold-rolled and hot-rolled steel production capacity, raising its output to 3.5 million tonnes next year and 7.5 million tonnes in 2010, from 2.37 million tonnes in 2005.
The proposed issue comes almost four years after it indicated a plan in March 2003 to raise 800 million yuan to 1.4 billion yuan to finance a five-year 2.08 billion yuan expansion of production facilities.
The plan was approved in April 2005 but was held up due to a ban on new shares sale by mainland regulators to prepare for a reform to make all state-owned shares tradable. The ban was lifted in May last year.
Chongqing Iron's latest planned shares issue comes after mainland steel shares soared sharply on the back of the easing concerns on the over-capacity in the industry as the government restricted new project approvals.