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More Chinese firms look abroad to list

Publication Date : 15-01-2013


Golden Wheel's decision to postpone its overseas public listing looks to have paid off for the Chinese developer.

Its initial public offering (IPO) debut in Hong Kong last Thursday netted HK$756 million (US$98 million), boosted by strong investor appetite which allowed the company to price its IPO at the upper end of the indicative price range.

The developer had planned to list by the end of last year but postponed the move amid uncertainty about market demand.This surge in investor interest in China's growth story this year has extended to other markets like the United States, which had earlier been convulsed by a spate of accounting scandals involving listed Chinese firms.

Nasdaq-listed social media firm YY Inc has seen its share price rise over 40 per cent since it went public last November. YY was one of just two Chinese listings in the US last year, capping one of the worst years for Chinese IPOs overseas since 2003.

But things are turning around. Recovering stock markets, along with Beijing's move to ease restrictions on local firms listing abroad, could boost overseas IPOs by Chinese firms in Hong Kong, the US, Europe and Singapore. "With the global economy likely to stabilise in 2013, Chinese IPOs overseas will likely reverse their slump," said market research firm ChinaVenture analyst Li Ling.

Last year, just 71 companies listed overseas, raising a total of 64.6 billion yuan (US$10.3 billion). That is about half the amount raised by 104 firms in 2011. The number is likely to jump this year, although it will be nowhere near the 2010 peak, added Li. That year, a record 110 Chinese firms raised 16 per cent of the global IPO proceeds.

Still, others are expecting a strong showing. "On the global front, China is expected to lead the IPO market for 2013," said Deloitte Singapore's chief of operations for clients and markets Ernest Kan.

Beijing opened the doors for more overseas listings last month by easing the "456" threshold.

Firms no longer need at least 400 million yuan of net assets, US$50 million of financing and 60 million yuan of net profits to qualify. Regulators did so to ease the backlog of well over 800 Chinese firms waiting to list at home.

The queue grew after new IPO approvals were frozen from October last year to avoid further destabilising the Shanghai market - one of the world's worst-performing bourses for most of last year.

Rather than wait at least three years to list at home, some firms with urgent fund-raising needs may look overseas, said Li. Singapore is among the markets that could benefit from this.

"With the relaxation of overseas listing rules, we would expect to see the growth of (Chinese) big-ticket IPOs in Singapore over the next few years," said Dr Kan. In China, industries such as energy and resources, agriculture, manufacturing and real estate are "bound to have sizeable candidates seeking a listing overseas".

"Deloitte has some of these China-based companies in our pipeline, seeking a listing on the Singapore Exchange (SGX)," he added. The firm expects 20 to 30 IPOs on SGX this year, some of which could be from China. One China-based firm that has already indicated plans to list on SGX this year is developer Qingjian Group's Singapore unit. It reportedly hopes to raise S$125 million (US$102 million).

Last year, SGX said it had "four companies with operations in China listed". Said SGX's head of listings Lawrence Wong: "We have been in active dialogue with Chinese companies interested in tapping our international pool of funds."

SGX will be competing against Hong Kong - the top destination for Chinese IPOs last year with some 58 companies raising 63.2 billion yuan there, although the IPO proceeds were 44 per cent lower than in 2011. This year, it is likely to see 80 IPOs - up from 65 last year - with a number from mainland- based firms, according to a forecast by PricewaterhouseCoopers. Just last week, Sinopec Engineering, a unit of a state-owned petroleum giant, reportedly applied for a US$1.5 billion IPO.

The US is seen as another favoured destination.

"China's new-tech sectors are more based on new concepts, rather than profit models (which) the US market is more willing to accept than Hong Kong," said Yiguang International consultancy analyst Huang Meng.

Qianinfo Consulting senior analyst Lin Xiaoli noted that firms "in the new sectors like fast-growing high-tech, education, new energy, health care and life sciences are widely welcomed in the US".

In Europe, where nine Chinese firms went public last year, energy, mining and infrastructure attract interest. But it is getting harder to list in the West, amid fraud scandals at several listed Chinese firms and US regulators' probes of Chinese auditors. Lin said: "Especially in the recent two years, China stocks performed dismally after IPO, bruising US and Europe markets' receptiveness to China listings."

Other markets including Singapore have been hit by corporate governance scandals at Chinese firms. SGX sought to attract larger, quality listings by raising mainboard admission standards from last August.

Still, Li is hopeful rising Chinese stocks like YY and online retailer Vipshop in the US will "ease investors' negativity" and revive interest in new stock offerings. Vipshop, whose stock price has doubled since its listing last March, was the top-performing Internet IPO in the US last year.

Distrust in Chinese stocks will take time to dissipate, acknowledged well-known Chinese venture capitalist Lee Kai-fu, in a recent commentary in financial magazine Caixin. "But in the next year, we will still be able to see (a) gradual return of confidence to the market," he wrote, as long as no new scandals erupt among overseas-listed Chinese companies.


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