OpinionBAIC's showpiece IPO reveals much about the true state of SOE reform
As the crown jewel of Beijing's municipal government, BAIC listing carries political weight but isn't an example of SOE reform
How real is the mainland's much-talked-about state firm reform? The listing of one mainland carmaker is quite telling.
BAIC Motor, which makes vehicles with Daimler and Hyundai Motor, planned to raise about US$3 billion in a Hong Kong initial public offering during the summer.
However, investor appetite was tepid given its aggressive planned price-earnings ratio of 18 times. Three weeks ago, the firm's management told underwriters to postpone the listing application to November, which would have moved the listing to early next year.
That decision was overturned within a week. The carmaker filed its application early this month, lowering its PE ratio to between 12 and 15 times in return for a listing this autumn.
Why? The Hang Seng Index had rebounded from its late-June bottom but was still lower than the level a month before. Market sentiment was no justification.
State firm veterans pointed to rivalry among provincial-level administrations, in particular Beijing and Shanghai, eager to show they were the most faithful supporter of President Xi Jinping's state-owned enterprise reform.