Business | Markets
Market Watch: China gets ready for wave of public issues
In China, it is almost as if the global financial crisis never happened
- By Suranjana Roy Bhattacharya, Special to Gulf News
- Published: 00:00 December 14, 2009
What's the link between a Chinese massage parlour chain and the country's biggest train manufacturer? Both are raring to raise funds from initial public offerings in mainland China markets.
Last week, at least nine companies started IPO subscriptions in Shanghai. In China, it's almost as if the global financial crisis never happened.
The run-up to the New Year party couldn't have been better. In November, China's exports fell the least in 13 months. Imports surged 26.7 per cent from a year earlier as industrial production jumped.
Urban housing prices leaped to a 16-month high as first time buyers jammed the property market. Citic Securities, the biggest broker in China, upped the cheery decibel, reporting that the benchmark Shanghai Composite Index may reach 4,500 in 2010. (The Index closed at 3,247 last week.)
Over-zealous banks
While property markets usurp much of the attention of investors and policymakers, it is the more stodgy IPO market which may provide the crucial balance between an overheated industrial sector, over-zealous banks and a surging stock market.
Liu Yuanchun, deputy dean at the School of Economics, Renmin University of China, in an exhaustive analysis has defined how 2010 will be a litmus test for China's macro-economy.
On the one hand, the continuation, or expansion, of the ‘life-saving' 4 trillion yuan (Dh2.15 trillion) stimulus package has led to quick rebound and an overheated economy. But now, if the stimulus is rolled back, policy-stimulated demand will contract sharply and the hard won market buoyancy will disappear.
As a way out of this dil-emma, Chinese policymakers are banking on the IPO market. In recent weeks, China's securities regulator picked up the pace to allow companies to access funds through IPOs.
The government now wants private investment to take over state stimulus as the main growth driver and put the brakes on massive bank lending that has raised concerns about bad loans.
Chinese banks leant 8.9 trillion yuan in the first 10 months of 2009. The People's Bank of China is determined to stem such excesses and plans to slow new lending to between 7 trillion yuan and 8 trillion yuan next year.
Heavyweights
This month, heavyweights making it to the IPO stage are China CNR Corporation, which will issue up to 3 billion yuan-denominated A shares in Shanghai to raise 6.44 billion yuan for railway investment projects.
China Shipbuilding Industry Co, the country's largest ship equipment maker, plans to sell up to nearly 2 billion shares to raise more than six billion yuan. The state owned company also manufactures military products and missile launchers.
According to earlier reports, HSBC could be the first foreign company to list in Shanghai next year, raising as much as 50 billion yuan in an IPO. So far, only China-based companies are publicly traded companies in Shanghai.
Chinese companies have so far raised 149.1 billion yuan this year in mainland IPOs, a 44 per cent jump from the whole of 2008. China reopened its IPO market in June after a 10-month halt due to the global credit crunch.
To create more market liquidity and provide small and medium-sized enterprises more access to capital, China also launched the hugely-popular growth enterprise board, or ChiNext, in October. ChiNext, which operates from Shenzhen in East China, is yet to gain respectability as it fluctuates from wildly speculative behaviour.
With the world's largest IPO market shuffling under inexperience, global consulting firms are now rushing to set up office here. Risk and business consulting company, Protiviti, sees significant business opportunities, especially with ChiNext. Protiviti is working with a number of companies preparing to go public and float IPOs.
Rivalry
The boom this year will also sharpen Shanghai's new found rivalry with Hong Kong. Beijing is likely to push China's big state-owned enterprises to list domestically first, before moving to Hong Kong.
Mainland companies earlier found it easier to float shares in Hong Kong and then go to Shanghai for a second listing. But with China keen to raise more private investment within its territory, Hong Kong may lose out on the bulkier prizes.
The writer is a freelance journalist based in China.
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