China is making a splash in financial markets with the world's biggest initial public offering this year: today, its largest coal producer, China Shenhua Energy Co, hopes to raise nearly US$3 billion. Need more signs of China's mammoth appetite for global capital?
In coming weeks, three more major Chinese companies plan IPOs on Hong Kong's stock market, where together they aim to raise another US$5 billion.
Investor demand seems strong, particularly in Bank of Communications, China's fifth largest lender and the first bank to list outside China. Some analysts expect its shares will be oversubscribed by 200 times when it comes to market on June 23.
"Bank of Communications will definitely be very hot. Its pricing is reasonable and demand is quite big," said Herbert Lau, head of research at Celestial Asia Securities Ltd.
The bank plans to raise US$1.9 billion, and its initial share price is expected to be between HK$1.95 (US$0.25) and HK$2.55 a share. In sheer size, that would surpass last year's biggest Chinese IPO, a US$1.85 billion offering by Ping An Insurance (Group) Co.
But analysts also warn of risks in China's attempts to transform state-owned enterprises into competitive private companies.
China's IPOs are usually "politically driven," said Andy Xie (
The government is "using the stock market as an instrument to help these companies adapt to the market" -- and it remains to be seen how successful this experiment will be, he warned.
"The Chinese model is very different from what we've seen in other countries," Xie said. "The government is trying to create competitive companies, while usually other countries privatize these companies and leave them to entrepreneurs to improve."
Other Chinese companies seeking Hong Kong listings include China Minsheng Banking Corp., China's most prominent private bank, and container shipping giant China Cosco Holdings.
There are two smaller Chinese stock markets -- in Shanghai and Shenzhen -- but selling shares on Hong Kong's larger bourse allows Chinese companies to tap into a much wider pool of investors.
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