Fri, Oct 17, 2003 - Page 11 News List

China Steel GDR sale nets government US$815 million

BLOOMBERG

The government raised NT$27.7 billion (US$815 million) from its sale of a 10.6 percent stake in China Steel Corp (中鋼), a finance ministry official said yesterday.

The government sold 52.4 million global depositary receipts (GDR), each worth 20 locally traded shares, at US$15.56 apiece, said Vice Minister of Finance Susan Chang (張秀蓮) at a press conference yesterday afternoon.

The selling price represents a 3 percent discount to the stock's local close at NT$27.2 per share yesterday and a 1.5 percent discount to its Wednesday close.

The GDR issuance help replenish government coffers by NT$27.7 billion, said Chang, who was formerly the executive secretary of the Cabinet's Development Fund (開發基金), which oversaw the sale on behalf of the Ministry of Economic Affairs.

Contribution of the sale may grow to NT$31.7 billion if the sale's organizers further sell off more shares within the next 30 days, she said.

As a 180-day lockup period is imposed, the government will not release more of its shares in the steelmaker in the near future although it plans to further release a 13 percent stake according to Chang.

After the sale, the government's share in China Steel has dropped to 26 percent, she said.

The government's proposed NT$237.4 billion budget deficit has forced it to sell stakes in state-owned companies to raise funds.

The nation's steelmakers benefited from a 23 percent first-half increase in exports as China ordered more steel products to make cars, pipes and home appliances.

"Taiwan really needs the money and wants to take advantage of the recent rise in stocks," said David Chapman, who helps manage about US$700 million in global equities at Towry Law Asia Ltd in Hong Kong.

"It's helping the budget deficit. It's not a bad time for them to reduce their holdings," Chapman said.

China Steel's shares are up 42 percent this year, closing yesterday at NT$27.20 apiece on the TAIEX.

The company sells about 70 percent of its output to processors at home, which is then mostly exported to China.

"There's still potential for growth," said Parker Wu, who holds China Steel shares among the equivalent of US$2.2 billion of assets at Shinkong Investment Trust Co in Taipei.

"China Steel's portion of direct sales to China may be small, but it's a more reliable investment than smaller Taiwanese companies that compete with the China's own" steelmakers, Wu said.

additional reporting by Joyce Huang

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