China cemented its position as the global IPO champion yesterday when China Everbright Bank raised Rmb18.9 billion ($2.8 billion) in the country's second-biggest initial public offering of the year. It is the fourth-largest in the world in 2010.
So far this year, Chinese companies have launched 261 IPOs on both domestic and overseas stock exchanges, raising a total of $63.7 billion -- already more than the $50.6 billion raised in 2009, and 46.8% of global IPO volume this yead, according to data from Dealogic.
The trend shows no signs of abating. PricewaterhouseCoopers (PwC) says that Chinese enterprises will continue coming to China and Hong Kong to raise capital in the remaining months of the year and some investment banks are indicating that they are expanding their equity capital markets desks to win a bigger share of the deal flow.
Perhaps the strangest element of China's IPO boom is that it comes amid terrible performance in the broader China market. The benchmark Shanghai Composite Index, which tracks the bigger of China's stock exchanges, fell 26% in the first half, making it one of the worst performers in the world. Even so, there is no shortage of would-be issuers ready to test the markets.
For Everbright Bank, that test has gone well so far. The mid-size lender sold 6.1 billion A-shares at Rmb3.1 each, which is at the top of an indicated range that went down to Rmb2.85. The price represents a price-to-earnings ratio of 16.4 times, the bank said in a statement to the Shanghai Stock Exchange yesterday.
The offering could be upped to seven billion A-shares if a 15% greenshoe option is fully exercised.
The trading debut is scheduled for August 18. China International Capital Corp, Shenyin & Wanguo Securities and China Jianyin Investment Securities are arranging the deal.
The size of Everbright Bank’s transaction is second only to the $20.8 billion deal from Agricultural Bank of China, which tops the global IPO list so far in 2010, and followed by the Rmb15.69 billion IPO by Huatai Securities in February this year.
The world’s second and third largest IPOs in the first half of 2010 were the $11.1 billion share sale by Dai-ichi Life Insurance in Japan and the $4.4 billion IPO made by South Korean’s Samsung Life Insurance, according to data from Dealogic.
PwC predicts the funds raised through IPOs in Shanghai and Shenzhen will reach Rmb500 billion in 2010. The total number of new listings may reach 300, including 25 in Shanghai and 275 on the Shenzhen board.
Separately, China Citic Bank, the banking arm of Citic Group, said late on Wednesday that it plans to raise as much as Rmb26 billion in a rights offer to replenish its capital reserves. It is the latest Chinese bank to announce plans to raise funds.
The bank will offer up to 2.2 shares for every 10 held, for a total of as many as 8.59 billion shares in Shanghai and Hong Kong, according to a company filing to the Hong Kong stock exchange.
The proposal will be submitted for shareholder approval. Proceeds from the issue will be used to improve the bank’s core capital ratio and to support the bank’s continuing development and business growth, the lender said in the same statement.