Green light for SOE listings may herald rebound in IPOs

Hong Kong's dismal listings market may be set to get a shot in the arm after two decent-sized state-owned enterprises - Sinopec Engineering and China Galaxy Securities - won approval to issue shares that could raise a combined total of at least US$2.5 billion.

Sinopec Engineering, a construction and engineering unit of China Petroleum Corp (Sinopec), Asia's largest oil refiner, will offer its shares at a price-earnings ratio of more than 10 times, translating into an offer worth between US$1 billion and US$1.5 billion, according to people with direct knowledge of the transactions.

The Beijing-based company, which operates on an asset-light business model, aims to use the fresh capital for overseas expansion, and its offer of new shares to potential cornerstone investors was "well received", according to bankers who asked to remain anonymous because the deals were private.

General investors are expected to get more detailed information later this week, after Sinopec Engineering begins pre-marketing its issue on April 19, followed by a roadshow on May 6 and pricing on May 16.

Joining the latest listings rush, China Galaxy Securities, the mainland's seventh-largest brokerage by assets, plans to raise at least US$1.5 billion in the third quarter in the face of lukewarm stock market conditions at home.

The brokerage firm relies heavily on retail stock trading and hopes to use its capital to expand into the more lucrative margin financing and stock lending business.