China’s Shandong International Trust makes history, raising up to US$450m in Hong Kong IPO

PUBLISHED : Monday, 27 November, 2017, 9:48pm
UPDATED : Tuesday, 28 November, 2017, 10:54am

Shandong International Trust on Monday became the first trust from China to launch an initial public offering in Hong Kong of 647 million shares to raise as much as HK$3.51 billion (US$450 million).

The stock, which is being offered at an indicated price range of HK$4.46 to HK$5.43 per share, is expected to start trading on December 8 after the company failed in its first attempt to list in Hong Kong earlier this year. SIT also becomes the first Chinese trust since 1994 to list after Shaanxi International Trust and Anxin Trust.

Analysts said a Hong Kong IPO has become a relatively better choice for trust firms, as mainland regulators view direct A-share listing plans with caution. Authorities on the mainland have tightened financial scrutiny and reining in the vast shadow banking industry, at the heart of which is trust companies.

SIT, backed by Shandong’s provincial government, was ranked No 25 among China’s 68 trust firms with 255 billion yuan (US$38.6 billion) in assets in 2016, according to the company.

Although SIT declined to elaborate why it failed to list in its previous attempt, analysts said the firm’s original plan may have been affected for a slew of reasons, including its holdings in Century Plaza Hotel, the first company forced to delist from the Shenzhen market in 2017, a regulatory warning for allegedly assisting local governments in “irregular debt financing”as well as a fine for failing to make a timely disclosure of information to trust beneficiaries.

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“We have been working on the IPO plan for long and Hong Kong has been our destination since the beginning,” said Wang Yingli, chairwoman for SIT, on Monday.

She said the company had not considered an A-share IPO. “We want to expand our international business. Hong Kong is an open, international market and the best platform for us to go public.”

Ronald Wan, chief executive officer of Partners Capital, said investors usually have concerns regarding mainland trusts, as many of them have opaque structures.

We have been working on the IPO plan for long and Hong Kong has been our destination since the beginning
Wang Yingli, chairwoman Shandong International Trust

“It’s usually hard for trust firms to get the green light [to directly list on the A-share market],” he said.

Chinese regulators recently unveiled rules to tighten control on asset management products and have also pushed trust firms to increase transparency about their lending operations.

“Regulators may not want to send the wrong signal [by approving a direct A-share IPO],” Wan said.

In October 2015, the China Banking Regulatory Commission said it would support mixed ownership reform in trust companies and would allow those that meet its requirements to list and conduct mergers and acquisitions.

Since December last year, the China Securities Regulatory Commission has approved several trust firms’ plans for indirect listings via buying listed shell companies and injecting assets into them.

China’s trust industry managed a combined 22 trillion yuan of assets at the end of the first quarter of 2017, up 25 per cent year on year, according to figures from China Trustee Association.

SIT said it plans to use the proceeds for property investment and wealth management, as well as acquiring interests in financial companies and asset managers in China.

Government-owned Shandong Lucion Investment Holdings controls a 69.27 per cent stake in SIT. CNPC Asset Management, an arm of China National Petroleum Corporation, owns 25 per cent.

For the first five months of 2017, SIT said its net profit increased 41 per cent year on year to 400 million yuan.