DIRECTORS of China's state-owned companies destined for H-share listings are getting a sharp lesson in the realities of market economics as their investment bankers tell them to scale back the size of issues and reduce the subscription price.
With market conditions changed and international investors less willing to pay premium prices for China issues, the companies are being told that the kind of prices achievable just a few months ago are no longer feasible.
''The reaction among the Chinese issuers is a mixture of anger and bewilderment. They are asking, 'If we could do this before, why not now?','' said Joe Josephson, managing director of US investment bank Smith Barney Shearson. Issues would still be done but were likely to be down-scaled in response to market demand, he said.
''Many of the companies were told by the banks during the tender period that they would be taken to New York at 20 times earnings. Well, it's not going to happen,'' said another US banker.
He said that the expectations of the H-share companies had been built up by the sales frenzy which accompanied the banks pitching their underwriting services.
With so many fighting for the mandates, few provided the mainland firms with the normal caveat that prices can go down as well as up, which accounted for their surprise, said a banker at a British house.
Since Tianjin Bohai attained its full subscription by a whisker last month, it has been apparent that international investors' appetite for China issues has diminished.
