Chinas state-driven efforts to stimulate its economy won
a vote of confidence from the market this week with the pricing
of the worlds biggest initial public offering of the
Zhongwang Holdings, a Chinese aluminium company, priced its IPO
on Thursday at HK$ 7 a share, raising $1.3 billion.
The deal signals that demand for Chinese stocks remains high
despite a strong rally in share prices in recent weeks. It is
the biggest new listing on any of the worlds exchanges
since July last year.
The shares, however, priced towards the low end of the targeted
range of HK$6.80-HK$7.80. Markets had weakened at the start of
the week on fears over the spread of swine flu and renewed
concerns over the health of US banks.
Joint bookrunners Citic Securities, JPMorgan and UBS marketed
Zhongwang as a play on Chinas rail sector, where the
government is investing billions of renminbi to upgrade
infrastructure and buy rolling stock.
Those efforts have been underway for the last two years but the
government is accelerating its investment programme as part of
the Rmb4 trillion ($582 billion) fiscal stimulus announced at
the end of 2008.
Zhongwang makes aluminium components that are used in railcars,
and lists the Chinese Ministry of Railways among its many
customers. That partly explains the companys appeal to
Fund managers placed orders worth well over twice the 1.4
billion shares on offer, according to bankers involved in the
deal. Individual buyers were less enthusiastic, taking up just
70% of the shares offered to retail investors.
Tim Bassett, a fund manager at Hume Capital in London, said:
Logically Asian markets should never have fallen as much
as they did. There is an opportunity to bounce back, but not to
the madness of the last five years.
China doesnt have a lot of the problems that
Western markets have in terms of over-leveraging, but it is
massively dependent on exports.
Companies in the Asia Pacific region have raised a total of
just $660 million from 38 IPOs since the start of 2009, down
93% from the same period last year.
Mark Williams, head of equity capital markets for Asia at UBS
in Hong Kong, said: The equity capital markets have
clearly been recovering this year. Most of the business has
come from rights issues and follow-on offerings, mainly in the
That business has been spread around the region, but we
expect IPOs still to be China-focused, given the interest in
Chinese infrastructure and companies linked to the stimulus