King first to hold yuan IPO

A Taiwanese air conditioner maker will sell shares in Shanghai next week, beating Unilever NV, Royal Philips Electronics NV and other companies to become the first overseas company to raise yuan on China's stock market.

Zhejiang King Refrigeration Industry Co (浙江國祥製冷) aims to raise 292 million yuan (US$35.2 million) from a share sale next Monday, it said in a statement to the Shanghai Stock Exchange.

The share sale may be a sign that China is ready to open its stock market to overseas companies anxious to raise yuan to fund expansion in the world's largest consumer market. Apart from Unilever and Philips, who are two of the world's largest consumer companies, HSBC Holdings Plc and Procter & Gamble Co have also expressed an interest in China share sales.

"This is good news for Chinese investors as they will have a wider investment choice," said Yao Maogong, chief trader at Shanghai Securities Co. "Foreign-controlled companies are usually better managed and have stronger corporate governance than domestic companies."

King Refrigeration is the first company to take advantage of a ruling by China's government in November 2001 that overseas companies be allowed to sell shares in China-incorporated companies of which they own at least 25 percent.

"Many foreign companies may soon follow suit and aim for an A-share listing as this will help to raise their profile in China, and the yuan proceeds can be used to finance local expansion," said Zhu Ping, a fund manager at Guangzhou-based E Fund Management Co.

In April, Ningbo Tongmuo New Materials Co, a maker of powder metallurgy products, became the first company to gain approval under the government's ruling, followed by Hefei Rongshida Sanyo Electric Appliances Co. The two Japanese-controlled companies are yet to announce listing plans.

Home appliance maker Tsann Kuen (China) Enterprise Co (燦坤), in which Taiwan's EUPA Industry Corp holds a 29 percent stake, sold foreign-denominated Class B shares in 1993 before the ruling was announced.

King Refrigeration, which is controlled by King Refrigeration Machinery Holdings Co (國祥製冷), Taiwan's biggest maker of industrial central air conditioners, plans to sell 40 million shares at 7.30 yuan each, it said in its statement. The offer price is 20 times the company's earnings per share last year.

King Refrigeration was set up by its parent company and four Chinese partners in Zhejiang Province in 1993.