Hong Kong is a major fund-raising centre for Chinese companies. 2004 has been a very busy year in the IPO scene. In the first quarter of 2004, there were 8 new equity listings on the main board. Equity IPO & post-IPO fund-raising totalled HK$36 billion. Average daily turnover was HK$19.7 billion.

Tuesday July 27, 5:37 PM
HK PRESS: China Netcom Seeking HK, US IPOs; May List Oct

HONG KONG (Dow Jones)--China Network Communications Group, the country's number two fixed-line operator, put in applications last week with U.S. and Hong Kong regulators to list in those markets, the Hong Kong Economic Times reported Tuesday.

The company, known as China Netcom, is likely to start marketing its initial public offering by the end of September at the earliest, and list in October, the paper said.

Hong Kong fixed-line operator PCCW Ltd. (PCW) said in May it was in "confidential discussions" with China Netcom about a joint venture, including the possibility of China Netcom taking a stake in PCCW's fixed-line phone business.

The Economic Times report said even if the talks were concluded before the launch of China Netcom's IPO, China Netcom won't likely pay for a stake in PCCW using IPO shares.

Wednesday July 28, 2:27 PM
Chinese telecoms giant preparing for US$1.5 billion initial public offering in New York, Hong Kong

(AP) State-run China Netcom, the country's second largest fixed-line telephone operator, has applied to list its shares in New York and Hong Kong in an initial public offering expected to raise US$1.5 billion, state media reported Wednesday.

The company, formally named China Network Communications Group Corp., filed applications with the U.S. Securities and Exchange Commission and with the Hong Kong Stock Exchange last week, the official newspaper China Daily reported.

Citing unnamed sources, it said the initial public offering was expected to take place in September.

China Netcom plans to list shares in its networks in six provinces and cities in northern China and its operations in Shanghai and Guangdong, the report said.

The company's nationwide broadband business and an overseas network it bought last year from Asia Global Crossing would also be included, it said.

The company plans to sell one-quarter of its share capital.

China Netcom was formed by a government restructuring of the former state phone monopoly that set up two competing corporations: China Netcom Group in the north, and China Telecom in the south.

The company incorporated two small data-communications companies, China Netcom Corp. and Jitong Network Communications Co., and 10 provincial telephone networks formerly belonging to China Telecom.

China Netcom has assets worth 240 billion yuan (US$29 billion), the China Daily said.

The independent newspaper Hong Kong Economic Times reported Tuesday that China Netcom has made a 23 billion yuan (US$2.8 billion) writedown of its assets in order to list its shares at an attractively low price.

The company expects to report a net loss of 11 billion yuan (US$1.3 billion) for this year, it said, citing banking sources.

The report said the huge writedown was apparently aimed at avoiding a repeat of the embarrassment that faced China Telecom when it failed in its first attempt to sell shares in 2002.

The company slashed the value of its share offering by half, eventually raising US$1.43 billion instead of the originally planned US$3.7 billion.

hkskyline, do you know a list that shows the value of stock markets around the world?
i wanna know the hk ranking.

Stock market capitalisation data is very hard to come by. I've been searching for a top 10 list for a long time and haven't found anything good at all. The HK Stock Exchange reports its results in August. Usually they'll mention something about the topic. I believe HKEx is among the top 10 in the world.

Wednesday July 28, 8:04 PM
CHINA PRESS: Bank of Commun Eyes Shanghai, HK Listings

BEIJING (Dow Jones)--Bank of Communications, China's fifth largest lender, is planning to list on both the Shanghai and Hong Kong stock markets, the 21st Century Business Herald reports, citing an internal management memo.

Central Huijin Investment Co. will invest 3 billion yuan ($1=CNY8.28) into the Shanghai-based bank, the report said, citing Huijin's Deputy General Manager Li Xiaoming.

State-run Central Huijin Investment is the biggest shareholder of both Bank of China (BCH.YY) and China Construction Bank (CCB.YY), two of China's four major state-owned commercial banks.

Newspaper Web site: http://www.nanfangdaily.com.cn

Ranking of Top 15 International Stock Exchanges by
Market Capitalisationas at 31 October 1996
(US$ million) *
RANK STOCK EXCHANGE MARKET CAP
1. NEW YORK 6 860 234.0
2. TOKYO 3 210 437.0
3. CHICAGO 1 666 287.2
4. LONDON 1 608 482.6
5. NASDAQ 1 415 132.0
6. GERMANY 621 520.0
7. PARIS 564 715.3
8. TORONTO 470 467.2
9. SWITZERLAND 407 835.7
10. HONG KONG 403 511.3
11. AMSTERDAM 345 783.0
12. AUSTRALIA 295 979.6
13. KUALA LAMPUR 292 660.9
14. JOHANNESBURG 248 835.8
15. TAIWAN 239 999.1


World Stock Markets - Ranked by Domestic Market Capitalisation
(December 2001)
http://www.axiss.com.au/content/pubs/_data_file_series/images/EquitiesFinal-5.gif

The 10 biggest stock markets in the world by market capitalization in 2002
1. NYSE 9 015 270
2. Tokyo 2 069 299
3. Nasdaq 1 994 494
4. London 1 856 194
5. Euronext 1 538 684
6. Deutsche Börse 686 013
7. TSX Group 570 223
8. Swiss Exchange 547 020
9. Borsa Italiana 477 075
10. Hong Kong 463 054

The 10 biggest stock markets in the world by market capitalization in 2003
1. NYSE 11 328 953
2. Tokyo 2 953 098
3. Nasdaq 2 844 192
4. London 2 460 064
5. Euronext 2 076 410
6. Deutsche Börse 1 079 026
7. TSX Group 888 677
8. Swiss Exchange 727 103
9. Hong Kong 714 597
10. Borsa Italiana 614 841

Information from International Federation of Stock Exchanges (fibv)

TSX means taiwan stock exchange??

Euronext means the whole europe trade there or...?

http://www.tse.com/en/images/logoPanel2.gif
TSX should be the Toronto Stock Exchange. There was a reorganization of the indices and components a while back. The index changed from the TSE300 to the S&P TSX.

http://www.euronext.com/images/logo1_en.gifhttp://www.euronext.com/images/logo2_en.gif
Euronext N.V. is the world's first cross border exchange business. It provides services for cash markets in Belgium, France, the Netherlands, and Portugal, and for derivatives in the UK.
http://www.euronext.com/editorial/wide/0,4771,1732_997839,00.html

The Euronext was mainly merged from the Paris and Frankfurt stock exchange market and became the second largest stock market in Europe.

As you can see that the Paris and Frankfurt markets were still individually ranked back in 1996.

Why is HSENG more famous than TSX while it is smaller?

I mean when you turn on the TV anywhere in the world, you would see Dow Jones, NASDAQ, NIKKEI, FTSE, CAC, HSENG being reported, but not TSX.

oh I can't believe Korean stock market isn't in the top 15...in these few months many things like samsung, LG, hyundai advertisements...are surrounded us in hong kong, but I can't see it in the top 15...ah and I can't believe hong kong is no.10...!!

How about shanghai A, B, Shenzhen A, B? What is it? How come I never heard of Los angeles A, B stock; San Francisco A, B stock, but in China have so many different stock market? (I don't know much about stock, just to learn^^) Can anyone give some links about these standings for me? Thanks!!~

Actually. Taiwan should be moving up the list as it is being upgraded early next year by many major index-tracking funds around the world. It will, in May '05, have the largest weight in these funds for the emerging world market funds. It will however be at the expense of Korea and Hong Kong as billions are expected to flow out of those markets and into Taiwan's markets. The most optimistic outlooks say new IPO's and the TW gov'ts aggressive campaign to have the Taiex become a premier capital market in Asia will bring up to 300 billion USD to the Taiex in the period following its weighting upgrade.

Shanghai and Shenzhen's stock exchanges are comparatively small. The A index is for local Chinese investors while foreigners can invest on the B market.

Shanghai Stock Exchange
http://www.sse.com.cn/sseportal/en_us/images/home_logo.gif

December 2002 ended with over 35.6 million investors and 715 listed companies. The total market capitalization of SSE hit RMB 2.5 trillion. In 2002, Capital raised from SSE market surpassed RMB 61.4 billion. A large number of companies from key industries, infrastructure and high-tech sectors have not only raised capital, but also improved their operation mechanism through listing on Shanghai stock market.

as more chinese companies will be listed in HK stock exchange, i think the ranking will keep rising.

^Exactly, i'm still think that taiwan & korean stock exchanges should be in the list since we hear about them most of the time.

yes.. its much easier to list in hk than in taiwan.. it takes only ~9 months to file a listing on the hang seng

^Exactly, i'm still think that taiwan & korean stock exchanges should be in the list since we hear about them most of the time.
haha yes, in MTR have samsung ads, korean movie ads, in tv have samsung, LG, Hyundai...etc ads, Korean drama that many women like to watch...hehe, Korean movie stars ads (Olympus), entertainment news that many women likes; HK golden computer, so many samsung, LGs. Especially in football match, both the Europe match and South America match the ads in the football pit is surrounded by Hyundai...haha. And other TV programs, sports, are sponsored by samsung, hyundai...etc. Bus ads, with Korean air conditioner, dvd player...electronics.etc. Really feel these months are surrounded by Korean products, and Samsung is working so hard against Sony, Panasonic...etc. But no listing in the top 15?? Taiwan is still higher in the stock market?

Thursday August 5, 6:29 PM
HK Set For US$25B Worth Of China IPOs In Next Yr-ABN Amro

HONG KONG (Dow Jones)--Even though recent initial public offerings by Chinese companies in Hong Kong have faced a lukewarm reception at best, there is a strong pipeline of mainland China listing candidates that could raise up to US$25 billion in the next 12 months, a senior banker said at a conference Thursday.

ABN Amro Rothschild's managing director of equity capital markets, Piers Higson Smith, said five Hong Kong IPOs by China companies would raise as much as US$6.5 billion in the fourth quarter of this year alone.

"They are on a committed track to raise funds," he said at the Cross-Border Listings by China Firms conference being held in Hong Kong Thursday and Friday.

The five are: Dongfeng Motor Corp., which is set to raise up to US$1 billion; China Minsheng Banking Corp. (600016.SH), also looking to raise up to US$1 billion; China Power International Holdings, which will raise between US$500 million and US$1 billion; China Network Communications Group, or China Netcom, which could raise about US$1.5 billion; and coal giant Shenhua Group Corp., which could raise up to US$2 billion.

The Hang Seng Index, which closed 1.7% higher Thursday at 12491.92, has been on a downward trajectory since hitting a 35-month high of 13928.38 on Feb. 18.

"Interest rate concerns have been hanging over the market, there have been worries about the (Chinese) government taking an aggressive stance in slowing its economy, and many hedge funds had taken the view that the U.S. dollar wouldn't weaken further and so liquidated Asian assets to buy U.S. assets," Smith said.

"Looking into the second half of the year, there are concerns about (high) oil prices, the U.S. elections and corporate earnings, but we believe these concerns are overdone," he added.

After a frenzy for Chinese IPOs sparked by 2003's largest IPO, that of China Life Insurance Co. (LFC) late last year, recent mainland listings in Hong Kong have generally performed badly in aftermarket trade.

Aside from exceptions such as the IPOs of Tencent Holdings Ltd. (0700.HK), the operator of QQ, China's largest instant messaging platform, or Inner Mongolian milk producer Mengniu Dairy Co. (2319.HK), most recent IPOs have gone the way of chipmaker Semiconductor Manufacturing International Corp. (SMI), which tumbled 8% on its trading debut in March.

Shares in China's second-largest life insurer, Ping An Insurance Co. (2318.HK), which raised HK$14.3 billion in Hong Kong's largest IPO so far this year, are still trading below their HK$10.33 offer price. They closed at HK$10.0 Thursday.

China Film sets stage for share sale in HK
Olivia Chung, HK Standard

State-owned China Film Group, the mainland's largest movie maker and distributor, plans to sell shares in Hong Kong, but details have not yet been worked out.

Some things seems certain though: the group will spin off its better businesses as a new listed unit and will not seek to sell the company as a whole, company officials said.

"To list on the [Hong Kong] stock market is a good way for our group to restructure itself because the group has similar problems to those facing other state-owned enterprises, including too many staff,'' Qi Zhiyong, director of the general office of China Film Digital, a subsidiary of China Film Group, said. "If we spin off some businesses that perform well, we could attract investment and divert staff to work there.''

China Film was chosen by the central government to spearhead a restructuring of the country's film and distribution business, he said. The group hopes to restructure itself through listing. "Listing the whole group, including some operations that perform poorly, is no good for the development of the group,'' he said.

As part of its restructuring to prepare for the listing, China Film is boosting capital by selling some fixed assets while increasing investment in projects.

"The group has sold the Beijing Film Studio and is investing into a film and television shooting base in [Beijing's] Huairou,'' he said.

Yang Buting, chairman of the China Film Group, said central authorities approved the group's listing plan.

"According to current rules, a company applying for listing must prove its profitability in three years after filing in its application for listing,'' Yang said. "But our group has been exempted from this requirement and the authorities will only require us to present a three-year track record before filing the application.''

Both Yang and Qi declined to specify which parts of China Film will be included in the new unit.

Yang said the group wants foreign investors to take stakes in its business, but will insist that it be the controlling shareholder in any joint ventures. China Film Group, established in February, 1999, has more than 20 subsidiaries including film production, imports and exports, distribution and cinemas. It employs more than 3,700 people.

Last year, the group produced more than 50 movies, half of the country's total, and made an operational income of more than 200 million yuan (HK$188.5 million). The group opened 50 digital cinemas last year, making China second in the number of high-tech cinemas after the US.

Emperor Multimedia Group chief executive officer Albert Lee said the group's share sale should go well given its dominance of the Chinese film production and distribution markets.

14 August 2004 / 04:36 AM

'Expensive' HK still attracts mainland IPOs
Olivia Chung, Hong Kong Standard

Despite the relatively high cost of selling shares in Hong Kong, mainland enterprises still prefer launching their initial public offerings (IPO) here to take advantage of superior services and access to international capital.

At the Hong Kong Investment Environment Seminar, co-organised by InvestHK and the Guangdong provincial government, some mainland companies seeking a listing in Hong Kong complained about the high cost of going public in the territory.

Liu Zhixing, executive vice-president of the Shenzhen-listed Midea Group, said the cost of listing in Hong Kong, including sponsorship, underwriting commission and listing fees, is high.

"The cost of listing in Hong Kong is about 60 per cent higher than in the United States and Britain, which has some influence on my company's listing plan,'' he said on Friday.

The top air-conditioner and white-goods manufacturer, which is based in Guangdong's Foshan city, plans to sell shares in its generator, compressor, air-conditioner and microwave manufacturing businesses.

Liu refused to say when and how much his company plans to raise funds.

However, he said Hong Kong's geographical proximity and cultural affinities still make it a better place for Guangdong companies to sell shares than other foreign markets. "Apart from sharing many similarities with Guangdong, Hong Kong can provide free information flow to the markets."

And accounting standards in the US and other countries "are very different from those of the mainland''.

Guangdong Kelon Electrical Holdings Company chief executive and president Cong Mengliu echoed Liu's views.

"Hong Kong can provide high-quality accounting and legal services for listing - the professionals can handle accounting reports, legal documents and other things in foreign languages very well," he said. "Besides, the companies have easier access to international capital.'' Also represented at the seminar was the mainland's largest security glass producer, Guangdong Golden Glass Technologies. The firm produces toughened and laminated glass.

Chairman Zhuang Dajian said the company plans to raise HK$100 million to HK$200 million on the Hong Kong stock exchange's GEM board as early as this year, even though selling shares here is 10 times more expensive than on the mainland.

The company's plan has been approved by mainland authorities, although it has not made a listing application in Hong Kong. Funds will buy more production facilities and be used as working capital.

30 August 2004 / 02:03 AM

London Stock Exchange to Open in Hong Kong

Wed Sep 8,11:39 AM ET

HONG KONG - The London Stock Exchange will set up an Asia-Pacific office in Hong Kong in hopes of attracting listings from mainland Chinese companies, a spokesman said Wednesday.

"Hong Kong was chosen as we feel it is the best strategic location for covering mainland China and the Asia-Pacific region," said Simon Wheeler, a spokesman at the London exchange.

The new office will support the exchange's efforts to attract Asian companies, including small- and medium-sized Chinese ones, to London's market.

Chinese enterprises raised a total of 23 billion euros ($19 billion) through overseas listing last year, the exchange's Asia-Pacific President, Zhu Xiaojian, was quoted as saying in the pro-Beijing Wen Wei Po newspaper.

Speaking at an investment forum in the southern Chinese province of Fijian, Zhu said the Hong Kong office will open by early November.

The announcement follows a similar move by the New York Stock Exchange, which has already established an office here to draw listings.

Hutchison Telecom Plans $1.1 Billion New York, Hong Kong IPO

Sept. 19 (Bloomberg) -- Hutchison Telecommunications International Ltd., controlled by Hong Kong billionaire Li Ka- shing, plans to raise as much as HK$8.81 billion ($1.1 billion) in an initial public offer in Hong Kong and New York.

Hutchison Telecom is offering 1.155 billion shares at HK$6.59 to HK$7.63 apiece, people involved in the sale said. It will offer American depositary shares at $12.67 to $14.67 each, with trading in New York to start on Oct. 14, they said. The shares are being sold by its parent Hutchison Whampoa Ltd.

Hong Kong-based Hutchison Whampoa, which is selling shares in its phone business in eight markets, is betting economic growth in emerging markets, and India in particular, will attract investors to its sale.

Revenue at Hutchison Telecom, which had more than 11 million subscribers at June 30, rose 53 percent in the first half to HK$6.9 billion. The telecommunications unit includes mobile phone businesses in India, Hong Kong, Macau, Thailand, Israel, Sri Lanka, Paraguay and Ghana. It also has a fixed-line business in Hong Kong.

Goldman Sachs Group Inc. is the IPO's sole global coordinator. Goldman's Hong Kong-based spokesman, Edward Naylor, and Hutchison's spokeswoman Laura Cheung, declined to comment.

To contact the reporter on this story:
Cathy Chan in Hong Kong at kchan14@bloomberg.net.

To contact the editor responsible for this story:
Bill Austin at billaustin@bloomberg.net.
Last Updated: September 19, 2004 07:18 EDT

South China Morning Post
September 27, 2004

Buyers turn picky after IPO woes
Hui Yuk-min

Initial public offerings can no longer count on the hype their predecessors enjoyed nine to 12 months ago as investors have become wise after being burnt, according to a market follower.

"For new IPOs, we're not going to see the 600-plus-times of over-subscription that Great Wall Automobile enjoyed in December last year ," said Darius Yuen, regional equity capital markets executive director at BNP Paribas Peregrine Capital.

He said China Green's 1,600-times retail subscription in January was also a short-lived phenomenon.

"Investors are becoming more sophisticated and selective now when they pick stocks after they burnt their fingers," he said.

Half of the 16 medium-to-large new listings this year that raised more than US$ 80 million each are trading below their issue prices.

China's largest chip maker, Semiconductor Manufacturing International Corp (SMIC), Nam Tai Electronic and Electrical Products and China Oriental are among the worst-performing IPOs this year. They have fallen more than 40 per cent since listing.

Still, the IPO queue is growing. Hong Kong Exchanges and Clearing said 11 companies that had secured a Listing Committee green light had yet to list by the end of last month while 64 firms were knocking on the committee's door.

Mr Yuen said investors, including retail buyers, had become very cautious and selective in picking IPO stocks. Investors would opt for quality companies but subscription levels would not be overwhelming, he said.

By contrast, most of the IPOs late last year and early this year boasted oversubscription of 100 times from retail buyers.

Mr Yuen said retail investors represented a big market for IPOs but liquidity would be slightly tempered by the shift of funds from equities to the property market, where sentiment is improving.

Accounting scandals involving mainland private enterprises are also to blame for investors losing interests in new offerings.

Mr Yuen believes only leaders in a few sectors, such as retail, manufacturing and infrastructure, will be able to attract respectable subscriptions for their IPOs.

"These are the sectors in which BNP is interested in bringing quality companies to the market."

BNP has sponsored the listing of 25 per cent of the 16 new medium-to-large IPOs this year, raising about US$ 1.5 billion out of the $ 7.3 billion total.

Hong Kong Hutchison Telecom IPO Raises US$900 Million -Goldman

HONG KONG -(Dow Jones)- Hutchison Telecommunications International Ltd. (2332.HK) Thursday set its initial public offering price at HK$6.01, at the bottom of an already lowered price range as it faced a lukewarm market response to its offer ahead of a Hong Kong and U.S. listing in the middle of the month.

According to listing sponsor Goldman Sachs, the price of HK$6.01 will allow Hutchison Telecom, the emerging markets telecom unit of Hutchison Whampoa Ltd. (0013.HK), to raise US$900 million.

That is below the maximum US$1.04 billion it could have chalked up had Hutchison Telecom priced at the top of its new price range, and well below the maximum US$1.12 billion that could have been achieved at the top end of an original price range.

The HK$6.01 pricing would give the listed Hutchison Telecom a market capitalization of about US$3.47 billion.

Hutchison Telecom plans to list its American Depositary Shares on Oct. 14 and list its shares in Hong Kong the following day.

On Tuesday - just two days before pricing - Hutchison Telecom lowered its indicative price range for its 1.155 billion shares on offer by about 7% to between HK$6.01 and HK$7.04 a share, from an earlier range of HK$6.52 and HK$7.55.

Meanwhile, HTIL's American Depositary Shares, which represent 15 ordinary shares, were Thursday priced at US$11.67 each. That was at the low end of the US$11.67-US$13.67 price range it had announced, also trimmed, from US$12.67-US$14.67.

A person familiar with the situation said the retail book, made up of 10% of the total shares on offer, was just half subscribed. That's in contrast to the retail offer by Chinese power firm China Power International Development Ltd.'s (2380.HK) retail offer, which a source told Dow Jones Newswires Thursday was 250 times subscribed, ahead of its Hong Kong listing also in the middle of this month.

The institutional tranche of the Hutchison Telecom IPO, accounting for 90% of the total shares on offer, was 2.5 times subscribed, a source said.

"It seems that investors were focused on cash flow and dividends, rather than growth," he said.

The lower pricing and weak subscription levels indicated investor wariness about the company's decision not to pay a dividend for the "foreseeable future".

Also holding back interest, fund managers had said earlier, was that Hutchison Telecom is unlikely to make a profit for at least two years. They also said the telecom company's intention to spin off its Indian operations in a separate listing in Mumbai, possibly by the middle of next year, also put investors off the IPO.

In the first half of this year, Hutchison's Indian operations contributed 46.5% of revenue at Hutchison Telecom. Last year, Hutchison Telecom recorded a net loss of US$28 million.

Because no new shares are being issued, the proceeds of the IPO will go to Hutchison Whampoa, which will be left with a stake of about 70% in the listed Hutchison Telecom. A Hutchison Whampoa spokeswoman said Thursday the conglomerate made a total profit of HK$4.1 billion from the deal.

Hutchison Whampoa, controlled by tycoon Li Ka-shing, was widely seen as having planned the telecom IPO as a way of raising funds to offset losses from its hefty investment into 3G operations, although the company has long insisted it has enough cash in the form of a US$17 billion war chest.

On top of that, Hutchison Whampoa has also said it would set aside the US$1 billion in gains from the IPO for Hutchison Telecom to use at a later date in the form of preference shares.

Hutchison Telecom has second-generation mobile phone operations in Hong Kong, India, Thailand, Israel, Macau, Sri Lanka, Ghana, and Paraguay, as well as 3G and fixed-line businesses in Hong Kong.

-By Nisha Gopalan, Dow Jones Newswires; 852-2832-2343; nisha.gopalan@dowjones.com

Friday October 8, 6:14 PM
China Power prices IPO near top of range
By Daisy Ku

HONG KONG, Oct 8 (Reuters) - Electricity firm China Power raised US$321.1 million from a Hong Kong IPO priced near the top of its indicated range on Friday after strong investor demand that bodes well for future Chinese fundraisings.

Enticed by a dividend promise and soaring power consumption in China, Hong Kong retail investors applied for 297 times the shares offered to them, sources close to the deal said.

As a result, the public portion of the sale of shares in the Beijing-controlled power generator was increased from 10 percent to 50 percent.

The institutional order book for shares in China Power International Development Ltd. was about 20 times covered.

The popularity of the offering bodes well for other initial public offering candidates from China after months of relative inactivity.

Telecoms carrier China Netcom and car maker Dongfeng Motor are among the mainland firms planning upcoming Hong Kong listings.

"Investors have plenty of cash and want to buy China stocks again," said Jacky Choi, fund manager at Value Partners, which manages about $2 billion.

Market hopes that Beijing will ease economic austerity measures have helped propel the H share index of Chinese companies traded in Hong Kong by nearly 38 percent from a mid-May trough by Thursday's close.

WELL TIMED

"The IPO is well-timed. The market favours the China utility sector now. The shares should have good after-market performance," said Yang Liu, fund manager at Atlantis Investment, who subscribed for shares in the IPO.

Other investors said the company was attractive in part because its 43-year-old chief executive, Li Xiaolin, is the daughter of former Chinese Premier Li Peng.

China Power sold 990 million shares, or 33 percent of its enlarged share capital, at HK$2.53 per share, near the top end of a range of HK$2.10 to $2.60, giving the company a market capitalisation of US$973 million.

China Power has said it will pay 25 percent of its profits as a dividend.

Other China IPOs destined for the Hong Kong market include Air China and the nation's fifth-biggest lender, Bank of Communications, along with the largest coal mining firm, Shenhua. Together with Netcom and Dongfeng, the deals could be worth a combined US$5 billion.

"The China Power deal will improve investors' confidence in new China offerings, but I think they are still selective," one investment banker said.

Banking sources said the US$1-1.5 billion China Netcom IPO was set for a hearing before the Hong Kong listing committee next week, and could begin unofficial marketing in the week of Oct. 18 at the earliest.

China Netcom plans to pay 35-40 percent of its profits as dividends, giving investors a dividend yield of about 4 percent, sources close to the deal had said.

"If China Netcom is priced at a discount to China Telecom, I think the IPO will be OK," Liu said.

BLACKOUTS

Electricity consumption in China grew at nearly 15 percent in the first eight months of this year, exceeding supply and triggering widespread blackouts. The shortage is expected to ease in coming years as numerous power plants are built across China.

Shares in China Power will make their debut on Oct. 15 and some fund managers said they expect the shares to reach HK$2.80-3.00 on their debut.

The price values China Power at 12.65 times its forecast 2004 earnings or about 11.5 times its 2005 price/earnings ratio. Its Hong Kong-listed peers trade at between 13 and 16 times 2004 profits.

The voracious investor appetite for China Power contrasted with a poor retail reception seen by tycoon Li Ka-shing's Hutchison Telecommunications International Ltd. (HTIL) .

The emerging markets phone unit of Hutchison Whampoa Ltd. priced its US$890 million IPO at the bottom of its range on Thursday after retail investors applied for roughly half the shares on offer to them.

Institutional buyers in the New York and Hong Kong deal subscribed for 2.6 times the shares in HTIL available to them.

China Shipping gives Hong Kong investors a tricky choice
7 October 2004
Lloyd's List

WITH the listing of China Shipping Container Lines in July, investors in Hong Kong now have a choice of two stocks from China’s second largest shipping conglomerate to choose from – the box line or the dry and wet bulk operator China Shipping Development.

Which offers the better return for those wondering how they can cash in on the current China-related shipping boom?

For investors flummoxed on whether they should chase container or bulk stocks, the two China Shipping stocks do little to ease the dilemma.

Both companies have a high enough profile and are expanding dramatically. China Shipping Container Lines has just taken in its first 8,500 teu ship.

The CSCL Asiawas the first of five 8,500 teu container vessels CSCL has ordered in association with Canada’s Seaspan, along with eight 9,600 teu mega vessels that will start operating in the next few years.

Likewise, China Shipping Development has been on the expansion trail by ordering very large crude carriers at Dalian New Shipbuilding, while the company is also talking about ordering a further 15 VLCCs before 2010.

Both companies have delivered very solid results.

CSCL posted a massive 290% rise in net profits to Yuan1.52bn ($183.6m), up from Yuan390.6m in the same period last year. Both have a story to tell.

For the container line, Capt Li has said that along with the global elimination of a quota system on textile exports, shipments of highly competitive Chinese textile products will increase significantly, fuelling the growth of the container industry. In the second half of 2004, seven newly-built or time-chartered vessels are scheduled to be put into operation.

Remarkably, the share price has also been similar. CSD shares closed at HK$6.20, which is close to its 52-week high and about double its 52-week low of HK$3.25.

China Shipping closed September 28 at HK$3.27, just shy of its 52-week high of HK$3.37 and a solid improvement on the recent low of HK$2.50.

While CSCL is struggling to regain its IPO price, China Shipping Development has been favoured by fund managers.

HSBC Asset Management (HK) has been on a bullish run in CSD since becoming a major shareholder in July, raising its stake by 97%.

HSBC Asset Management last reported a purchase-related filing for China Shipping on September 6 of 2.84m shares at $5.68 each. This boosted its interest by 2.2% to 10.4%.

The group has been especially bullish in the past three weeks with 25.2m shares purchased since August 25, which has increased its holdings by 24%.

HSBC Asset Management became a major shareholder in the shipping group on July 12 after buying 2.5m shares at $4.64 each, which took its interest to 5.1%.

The group continued to buy, picking up 64m shares from July 13 to September 6 at progressively higher prices from $4.75 to $5.70 each.

The fund manager has good reason to be optimistic as CSD announced a first-half profit of Yuan885m last month, up 92.6% from a year ago.

Tuesday October 19, 11:18 PM
Singamas to raise HK$338.5 mln in share issue

HONG KONG, Oct 19 (Reuters) - Singamas Container Holdings Ltd. , the world's second-largest maker of shipping containers, said on Tuesday it would issue 88.81 million shares to raise net proceeds of HK$338.5 million (US$43.4 million).

Its major shareholder, Pacific International Lines, agreed to place the shares at HK$3.93 each and said it would subscribe for the same amount of new shares from the company.

The placing and issue price represented a discount of about 2.96 percent on the stock's last trade of HK$4.05 before dealing was suspended on Tuesday afternoon pending the placement announcement, the company said in a statement.

The proceeds would be used to relocate and expand a dry freight container factory in Tianjin operated by Tianjin Pacific Container Co. Ltd. and finance the start-up costs for a new dry freight specialised container factory in China's southern province of Guangdong, it said.

With the funds raised from the placing, Tianjin Pacific's production capacity would be doubled to 100,000 20-foot equivalent container units (TEUs), and the new dry freight container factory in Guangdong will lift the company's annual production capacity by 200,000 TEUs, the statement said.

The placement size was bigger than fund managers had suggested earlier in the day of 63.18 million shares at HK$3.81-$3.93 each.

Singamas said the placement was subject to a six-month lock-up period.

After the transaction, Singapore-based Pacific International's holding in Singamas will be diluted to 47.33 percent from 55.38 percent.

Singamas' share sale is the latest in a string of placements in Hong Kong, including leisure and entertainment firm Melco International Development Ltd. , amid steady equity market sentiment.

(US$=HK$7.8)

Copyright 2004 South China Morning Post Ltd.
October 19, 2004

Taiwanese Firms Eye Hong Kong Exchange Listing
Foxconn and Juteng are on track for listing, while IPE is likely to tap market earlier with more modest ambitions

Sidney Luk and Nichole Chan

Two Taiwanese technology equipment makers are eager to enter Hong Kong's equity markets to raise up to HK$1.5 billion by the end of the year.

Foxconn International Holdings, a subsidiary of Hon Hai Precision Industry, was looking to tap between HK$ 800 million and $ 1.2 billion with an initial public offering being arranged by Goldman Sachs and UBS, sources said.

The company hopes to gain regulatory approval next month and list the shares by the end of the year.

Foxconn mainly makes telecommunications networking and mobile equipment. It was estimated to have net earnings of more than HK$400 million last year.

Juteng International Holdings, which makes casings for computers and other consumer products, hoped to raise about HK$300 million from the main board in December, sources said.

The company had revenue of about HK$500 million last year and customers include Asus, Sony and Apple.

Juteng is moving towards developing niche, 0.6mm laptop casings - the thinnest in the world - which cost at least five times more than the more widely available 1.2mm to 1.8mm casings.

The company was also in discussions with US computer makers to produce laptop casings printed with three-dimensional graphics, said Juteng chairman and chief executive Cheng Li-yu.

"Laptops are now getting increasingly handy and makers are looking for special designs to differentiate their products from the others. As we are involved in research and development as well as casing manufacturing, we provide one-stop shopping for computer makers who are looking for different casings for different products," Mr Cheng said.

The company's two production bases in Jiangsu province had the capacity to make one million casings a month, he said.

Juteng was counting on the robust growth of laptop sales in China that was expected to increase from US$13.23 million last year to $39.65 million in 2008 at a compound annual growth rate of 25 per cent, iSuppli estimated.

However, fund managers said Juteng lacked competitiveness.

"There are copycats in the market," one said. "The market has low entry barriers and other makers can easily copy the technology and designs."

Another technology equipment maker, IPE Group, said yesterday it would issue 127.5 million new shares after a delay earlier this year, in the hope of raising HK$56.4 million to $78.8 million from a main-board listing planned for November 1.

"The market in June was fluctuating while there were large-scale capital -raising activities such as Ping An Insurance IPO," said Harold Kwan, the managing director of Partners Capital International, the sponsor of the deal.

"We believe now is a better time as we can provide the financial records for the first half of the year, which show an expected improvement from the whole year of 2003."

The firm posted net profit of HK$22.84 million for the first half on revenue of $131.44 million. Last year's profit was $42.4 million on turnover of $208.25 million.

Meanwhile, sources said Taiwanese-based Asia Cement had put its HK$1 billion listing plan on hold, despite being granted approval in July, because the firm was still fine-tuning the share pricing.

"Investors are not positive towards the market sentiment for a cement stock," a source said.

South China Morning Post
October 23, 2004

ZTE in pole position for listing Mainland telecoms equipment supplier on track to beat Minsheng Banking as the first A-share firm to list in HK

Hui Yuk-min and Nichole Chan

China's No2 telecommunications equipment supplier ZTE Corp is on track to become the first mainland A-share company to list in Hong Kong after it was revealed that China Minsheng Banking Corp's listing ambitions had run into delays due to shareholder resistance.

The Shenzhen-listed A share, which revived its once-aborted H-share plan in the summer, now hopes to receive the go-ahead from the Hong Kong stock exchange in the middle of next month, paving the way for a December launch of a US$ 350 million offering sponsored by Goldman Sachs.

ZTE's timetable is likely to clash with a string of companies aiming to sell shares before the Christmas holiday, including national carrier Air China, Beijing Youth Daily, a subsidiary of Taiwan-listed Hon Hai Precision Industry's telecommunications equipment unit Foxconn International Holdings and wireless network equipment provider Shenzhen Powercom. These five companies are expected to raise about HK$ 12 billion.

ZTE submitted its latest listing application to Hong Kong Exchanges and Clearing in July, about a month after Minsheng, and the two A-share companies have been racing to become the first to launch a landmark offering in Hong Kong.

ZTE first applied to launch in Hong Kong in 2002, but the plan was aborted in April last year due to opposition from shareholders over price issues.

Similarly, Minsheng's H-share offering, which is also being sponsored by Goldman, has been bogged down by shareholders' concerns that the value of their A-share holdings may be diluted because of the huge valuation gap between the Hong Kong and mainland stock markets.

Until now, mainland companies have first listed in Hong Kong with a lower valuation before floating their shares in the domestic markets where they command higher price-earnings multiples.

ZTE and Minsheng are the first companies to attempt to reverse the trend.

It took ZTE nearly two years to convince its shareholders to accept that a Hong Kong listing would not diminish the value of their shares in the mainland market before they finally gave their approval in June.

The company plans to sell 160 million H shares or up to 20 per cent of its share capital in Hong Kong.

ZTE plans to use the listing proceeds to finance its expansion in overseas markets and to develop new products and technologies.

The telecommunications equipment supplier said in its interim results that it would step up its efforts to expand into overseas markets after more than doubling its earnings.

Buoyed by a 353.48 per cent growth in exports, ZTE reported a 163.46 per cent year-on-year surge in first-half profit to 513.18 million yuan. Turnover for the period doubled to 11.77 billion yuan. International sales quadrupled to 2.07 billion yuan.

Goldman is the sole sponsor for ZTE's listing while Minsheng's flotation is sponsored by Citigroup, Deutsche Bank and Goldman.

Monday October 25, 10:06 PM
London Exchange Opens Hong Kong Office

London Stock Exchange PLC opened an Asia-Pacific office in Hong Kong Monday in a bid to cash in on the growing number of Chinese companies seeking to raise capital overseas.

Hoping to attract mainland Chinese companies to list in London, the exchange's chairman Chris Gibson-Smith said the London exchange has lower compliance costs than the New York Stock Exchange because it places an emphasis on "principles and standards" as opposed to laws, which can bring costly penalties.

Currently, only five Chinese firms are listed on London's main index with a total market capitalization of $10.6 billion. One mainland company is listed on AIM, London's stock exchange for smaller, emerging companies.

The New York Stock Exchange Inc. already has an office in Hong Kong, and there are 16 Chinese companies listed on the U.S. market, including China Life Insurance Co., whose $3 billion initial public offering in 2003 was said to be the world's biggest at the time.

Wednesday October 27, 3:55 AM
China Netcom U.S. IPO to raise up to $1.1 billion

By Daisy Ku and Nicole Maestri

NEW YORK/HONG KONG, Oct 26 (Reuters) - China Netcom, China's fourth-largest telecom carrier, plans to raise as much as US$1.1 billion in its upcoming U.S. initial public offering, according to a regulatory document filed on Tuesday.

The Beijing-based fixed-line carrier set the terms for its planned IPO at 47.1 million American depositary shares in the estimated price range of US$20.24 to US$23.12 per ADS, or HK$7.88 to HK$9.00 per common share to be traded in Hong Kong.

Each ADS represents 20 common shares, according the document filed with the U.S. Securities and Exchange Commission.

China Netcom's deal will be the biggest telecom IPO this year from Asia. State-controlled China Netcom was set to begin a management roadshow on Wednesday in Hong Kong to market a share sale that will make it the last of China's four big telecom companies to list in Hong Kong and New York.

China Netcom said it plans to sell another 104.6 million shares in Hong Kong, totaling more than 1 billion common shares in a global offering.

Sources said the IPO was set at roughly 8.3 to 9.4 times 2004 earnings, or 7.2 to 8.2 times its forecast profits for 2005. At the bottom of the pricing range, it would be sold at a discount of about 17 percent to rival China Telecom's 10 times 2004 adjusted price-to-earnings multiple.

Given its smaller size and less affluent northern territory, several watchers said Netcom should trade at a discount.

"With China Netcom's management capability yet to be seen, it should be priced at a 20 percent discount to China Telecom," said James Cheng, fund manager at Asia Strategic Investment.

Although Netcom plans to lure investors with a 4 percent to 4.8 percent dividend yield, Cheng said, the debt-laden firm may find it difficult to maintain a 35 to 40 percent dividend payout ratio when it starts investing in third-generation (3G) mobile service.

SPENDING ON 3G

Two recent Asian telecom IPOs, Hong Kong-based Hutchison Telecommunications International Ltd. and Singapore's StarHub Ltd. , met with chilly receptions from investors, which may put pressure on China Netcom to price its deal relatively cheaply.

Netcom's net debt-to-equity ratio stood at 101 percent at mid-2004, and Goldman Sachs, one of the underwriters, expects it to fall to 90 percent by the end of the year.

China Netcom, which has 77.6 million fixed-line users, plans to spend $8 billion by 2006 to upgrade its networks.

Goldman estimates China Netcom will have to spend another $5.4 billion on 3G in the first five years of operation, which could cut the company's net profits by 16-23 percent during 2007 to 2009 if it builds the network itself, or 10-14 percent if it leases the network from its parent firm.

China Netcom's free cashflow is expected to turn positive at 529 million yuan (US$63.9 million) in 2004 and rise to 7 billion yuan in 2005 and 9.5 billion yuan in 2006 as it reduces its capital expenditure and grows revenue, Goldman said.

China International Capital Corp. (CICC) and Citigroup are the other two investment banks handling the offering.

The company is selling 42.31 millions ADS, while shareholders are selling 4.75 million ADS in the IPO.

Friday October 29, 10:08 AM
HK PRESS: HKEx Raises US$28.4B In Capital In Jan-Sept

HONG KONG (Dow Jones)--Hong Kong Exchanges and Clearing Ltd. (0388.HK) raised US$28.4 billion in capital from new listings and share placements in the first nine months of 2004, making it the second-largest fund raiser among stock exchanges worldwide, the South China Morning Post reported Friday.

HKEx has overtaken bourses in London, Europe and Japan and is next only to the U.S. in terms of capital fund raising. The New York Stock Exchange raised US$82.9 billion in the nine months to September, while the London Stock Exchange raised US$23.9 billion.

HKEx Chairman Charles Lee Yeh-kwong attributed the increase in capital raised to a surge in the number of mainland companies listing in Hong Kong.

In the 11 years since Beijing allowed mainland companies to raise equity overseas, 285 mainland companies have listed in Hong Kong, raising HK$859 billion, the SCMP said.

The HKEx is the owner and operator of Hong Kong's stock and futures exchanges.

Newspaper Web site: http://www.scmp.com

IPOs worth $40b loom with pre-Christmas bonus rush
Elliot Wilson, Hong Kong Standard
November 1, 2004

With bonus season looming, Asia's bankers are hurrying to push through a handful of large stock sales. Hong Kong could see as much as HK$40 billion in initial offerings by year-end.

On the year-end holiday menu - a selection of regional telecom and aviation plays, and a relatively new entrant to the Asia market, real-estate investment trusts (Reits).

"For deals to complete by Christmas, research should be published by mid-November at the latest," said John Sturmey, head of Asian equity syndicate for UBS. "It's a long process and there is a very short period of time between now and Christmas."

After all, no deal means no year-end bonus. "There are a number of deals that are expected to come ahead of Christmas which investment banks have been working on for a long time," said Jorge Munoz, head of syndicate for Deutsche Bank in Asia. "There are no clear signs indicating a significant rally by the end of the year, but investors still need to put money to work."

Up first in Hong Kong is China Netcom's HK$9.4 billion IPO, lead-managed by Goldman Sachs, Citigroup and CICC. The last unlisted major mainland telecommunications operator will debut in New York on November 16, and in Hong Kong the next day.

ZTE, China's second-largest supplier of telecoms equipment, hopes to raise US$350 million (HK$2.73 billion) from a long-delayed stock sale in Hong Kong. People familiar with the deal said a ZTE stock sale by the year end was "very high".

Above ground, two very different airline plays are battling to sell shares to investors this year.

In another long-awaited deal, Air China, a lumbering state-run corporation, hopes to raise up to US$700 million in a stock sale slated for next month, underwritten by Merrill Lynch and CICC. China's flag carrier, the last leading unlisted mainland airline group, is set for a surprise dual Hong Kong-London listing, probably next month, with the bulk of the sale earmarked for local investors.

In stark contrast to Air China's slightly dour image is Kuala Lumpur-based Air Asia, the region's first no-frills airline, which hopes to make its market debut on the Bursa Malaysia on November 22.

Air Asia, founded by colourful entrepreneur Tony Fernandes, is gunning to raise up to US$270 million from a share sale co-sponsored by Credit Suisse First Boston. Standing in the way of both airlines are investors jittery about a sector embattled by stubbornly high oil prices.

Wary investors may seek shelter in a raft of upcoming Reit offers in Hong Kong and Singapore. Reits, which bundle underlying real estate into listed stocks, typically offer investors high bond-like yields, as well as a particularly liquid method of investing in real estate. While Reits have taken off in the United States, Japan, Korea and Australia, they have struggled among Hong Kong investors. The Housing Authority is set to launch the world's largest public Reit offering, raising up to HK$20 billion from a pooled sale of assets, including malls and car parks, as early as December.

Investors expect the stock, underwritten by HSBC, UBS and Goldman Sachs, to yield about 6 per cent, based on the initial price. More Reit offers are expected next year from Singapore, China, Taiwan and possibly India.

Suntec City Development, a Singapore office complex partly owned by tycoon Li Ka-shing, plans to raise HK$11 billion from an initial stock sale this year.

Suntec, forecast to generate returns of about 7 per cent a year, is set to become the Lion City's most valuable Reit, and the fifth real-estate investment trust to sell shares in Singapore in the past three years.

Investment bankers say a further smattering of Asia stock sales can be expected.

Directories business, Yellow Pages Singapore, expects to raise S$240 million (HK$1.12 billion) from a stock sale this month, underwritten by UBS and DBS, while Taiwan handset maker Foxconn International has targeted a HK$1.2 billion Hong Kong offering this year, sponsored by UBS and Goldman Sachs.

Monday November 1, 11:07 AM
Air China faces cash shortfall after $800 mln IPO-paper

HONG KONG, Nov 1 (Reuters) - Air China, the nation's third-largest carrier, is poised to raise US$800 million in a Hong Kong/London dual listing but may have to raise more to meet its 18.8 billion yuan (US$2.27 billion) capital spending plans, the South China Moring Post reported on Monday.

The carrier, which operates a fleet of 136 aircraft, will spend 4.8 billion yuan to acquire 10 Airbus 319 and four Boeing 737-700 aircraft, with the remaining proceeds earmarked for debt repayment, the South China Morning Post cited a preliminary share sale document as saying.

Air China has to pay 17 billion yuan or 35 percent of its 48 billion yuan in debts and obligations within one year, with only 2.7 billion yuan cash on hand, while net cashflow from operations was 5.5 billion yuan last year, the report said.

Beijing-based Air China, which plans to sell 2.8 billion shares or 30 percent of its enlarged share capital, generated a net profit of 499 million yuan in 2002, 159 million yuan in 2003 and 788 million yuan for the first six months of 2004 on revenues of 24.9 billion yuan, 24.5 billion yuan and 15.3 billion yuan respectively, the document said.

Hong Kong's Cathay Pacific Airways Ltd. will buy a 9.9 percent stake in Air China when the firm launches the IPO later this month.

Friday November 5, 5:54 PM
UPDATE: ZTE Likely 1st Chinese Listed Co To Have HK IPO
By Carmen Chan

HONG KONG (Dow Jones)--The mould is about to be broken on China's dual listing practice, which traditionally holds that companies float shares in Hong Kong before being quoted on mainland bourses.

Market sources say Chinese telecommunications equipment maker ZTE Corp., which listed on the Shenzhen bourse in 1997, is now planning a US$350 million initial public offering in Hong Kong in December.

The listing will be closely watched as other companies are expected to follow suit to take advantage of better exposure to overseas investors.

"If everything goes smoothly, ZTE will be the first Chinese-listed company to dual list in Hong Kong," the source said, referring to the fact that so far all companies listed both in China and Hong Kong first sold their H shares in Hong Kong before floating their A shares on mainland bourses.

A and H shares are stock categories of Chinese companies. A shares are yuan-denominated shares that trade on the mainland and are reserved only for local Chinese investors and qualified foreign institutional investors. H shares are Hong Kong dollar-denominated shares of mainland-registered companies that trade in Hong Kong.

One reason for the "H first, then A" share practice, which isn't obligatory, is that it takes far longer the Chinese authorities to approve A-share IPOs than their H-share counterparts.

It generally takes a company at least two to three years from the day it mandates a listing sponsor to get its shares listed on China's two stock exchanges.

Under smooth conditions, it takes only about a year for a company to sell an IPO in Hong Kong.

As A share-listed companies grow, more are expected to follow ZTE's lead and look to Hong Kong to raise fresh funds and widen its investor base to foreign stakeholders.

According to sources, China Minsheng Banking Corp. (00016.SH), the country's first privately held commercial bank, could be the next to follow ZTE to Hong Kong.

One fly in the ointment could be the valuation gap between Hong Kong and mainland stock markets.

As a rule, the price earnings ratio of the A shares listed on the Shenzhen and Shanghai bourses are higher than the H shares of mainland firms listed in Hong Kong.

In the case of ZTE, its A shares are trading at 17.3 times 2004 earnings, according to Thomson Financial. The P/E ratio of its H shares can only be calculated once it sets the offer price.

Even so, ZTE's A shares have a markedly higher P/E ratio than the average of 10 to 15 times 2004 earnings of the telecommunications equipment industry as a whole.

ZTE has said it has received approval from the China Securities Regulatory Commission to offer up to 162.2 million shares in a Hong Kong listing. The company didn't disclose the size in terms of its total equity.

ZTE has said the proceeds will fund its overseas expansion as well as research and development.

In the first six months of 2004, ZTE posted a net profit of CNY513 million (US$62 million), up from CNY195 million in the same period last year.

Goldman Sachs, which is sponsoring the offering, declined to comment.

Air China and ZTE to market IPOs next week-sources
By Daisy Ku

HONG KONG, Nov 11 (Reuters) - Air China, the country's flag carrier, and telecoms equipment maker ZTE will on Monday begin marketing IPOs they hope will raise at least a combined US$1 billion, sources close to the deals said on Thursday.

The two companies aim to follow on the success of China Netcom , which this week raised US$1.13 billion in a Hong Kong and New York initial public offering (IPO) that drew heavier-than-expected demand from investors.

The two deals will compete for Hong Kong investors' attention with Hong Kong Housing Authority's real estate investment trust -- the Link REIT, which will also start marketing its US$3 billion worth offering next Monday.

Beijing-based Air China plans to raise at least US$800 million through selling about 30 percent of its enlarged share capital in a Hong Kong and London IPO.

The country's number two telecoms equipment maker ZTE will sell 15 percent of its enlarged share capital to raise US$350-400 million, the first attempt by a domestic-listed company to seek overseas listing in Hong Kong.

Shares in both Air China and ZTE, and units in the Link REIT are set to begin trading before Christmas.

TARGETING DIFFERENT INVESTORS

Sources said Air China, helped by a decision last month by Hong Kong's Cathay Pacific Airways to buy 9.9 percent of the firm, and the Link REIT are targeting different investors.

"China's air traffic is to grow at least 8 percent each year for the next 20 years. The stock appeals to investors focusing on growth," a source said.

China's aviation industry is expected to report its best profits this year since 1997 as the domestic passenger load factor has reached 70 percent for the first time since 1996.

The sector, which was hit by the deadly SARS virus last year reported a loss of 5 billion yuan ($604 million) in 2003.

In a recent research report, investment house CLSA estimated 12-15 percent air passenger travel growth in 2005 and a 14-17 percent air cargo growth.

But market watchers said rising jet fuel prices, which account for more than a quarter of operating cost, will cap margin expansion.

CLSA said that for a US$1 increase in jetfuel prices, the earnings of Air China's rivals China Southern Airlines' and China Eastern Airlines' will drop about 9 percent.

Malaysian budget airline AirAsia was forced to price its US$226 million IPO at 17 percent discount to the low end of an indicated range, or 16.7 times forecast 2005 earnings, amid investors' concerns over soaring oil prices and competition from rival low-cost carriers.

Under the government-driven consolidation began in October 2002, Air China merged with China Southwest Airlines and CNAC (Group). Air China will hold 69 percent of Hong Kong-listed China National Aviation Co. Ltd. (CNAC) , which holds a 43 percent stake in Hong Kong's number-two carrier Dragonair.

Friday November 12, 2:56 PM
Report: Air China plans to raise US$1 billion in initial public offering in Hong Kong next month

(AP) China's flag-carrier Air China Ltd. hopes to raise US$1 billion (€775 million) in an initial public offering in Hong Kong next month, Dow Jones Newswires reported Friday.

The airlines plans to sell about 2.8 billion shares, or an around 30 percent stake, Dow Jones quoted an unidentified source who is familiar with the deal as saying.

"The fund raising target is up to US$1 billion and the expected date of listing is Dec. 16," the source was quoted as saying.

There was no immediate comment from Air China about the report.

Two other mainland Chinese carriers have already listed in Hong Kong _ China Southern Airlines Co. and China Eastern Airlines Corp.

The Dow Jones report said Air China plans to list shares in London as well.

Air China, which has a fleet of 136 aircraft, is expected to receive formal approval for its initial public offering from the Hong Kong stock exchange later Friday, it said.

Cathay Pacific Airways Ltd. announced earlier that it plans to buy a 9.9 percent stake in Air China. The deal will give Cathay a bigger presence in the booming mainland market from which the Hong Kong carrier has so far been largely excluded.

The two airlines have said the deal will include coordinated schedules and joint marketing efforts.

China Merchants Bank Seeks Hong Kong IPO In 2H05 - Source
Monday November 15, 6:27 AM EST

SHANGHAI -(Dow Jones)- China Merchants Bank Co. (600036.SH), a major listed bank in mainland China, is planning an initial public offering in Hong Kong around the second half of next year, a source involved in the deal said Monday.

In an internal executives conference early last month, the bank's management agreed that it would need at least HK$10 billion to shore up its capital, the source told Dow Jones Newswires.

Since then, China Merchants Bank has been in talks with at least two global investment banks to find an underwriter for the IPO, the source said.

Merrill Lynch & Co. (MER) and Goldman Sachs Group Inc. (GS) have recently given their respective presentations to the bank, the source said.

A spokeswoman for Merrill Lynch in Hong Kong declined to comment on the issue, and executives at Goldman Sachs weren't immediately available.

According to several pages from a draft presentation obtained by Dow Jones Newswires Monday, Merrill Lynch said that an overseas IPO could help China Merchants Bank enhance its core capital base and broaden its international profile and franchise.

It also plays down shareholders' worries of a dilution in the case of an international IPO. "China Merchants Bank should not trade long-term strategic value of an international IPO for the short-term price advantage in the A-share market," said the Merrill Lynch presentation.

"Key shareholders' concerns on dilution of management rights and economic interests can largely be mitigated through proper corporate governance designs and capital market operations," it said.

China Merchants Bank recently finished raising CNY6.5 billion through five- year convertible bonds to help boost its capital base. Even that round of fund- raising was marred with protests from shareholders. The bank originally planned to raise CNY10 billion through the bond issue but scaled back its plan following opposition from shareholders.

China Merchants Bank is one of an increasing number of mainland banks seeking to raise funds through IPOs. China Minsheng Banking Co. (600016.SH), which is listed in Shanghai, is seeking an IPO in Hong Kong in the first half of next year. Several major state-owned banks including Bank of China (BCH.YY), China Construction Bank (CCB.YY) and Bank of Communications also aim to raise funds through share listings.

-With George Chen, Dow Jones Newswires; 8621 6218-3268; george.chen@ dowjones.com

-Edited by Sharon Buan

HK IPO market hungry for over $4 bln in new deals
By Daisy Ku

HONG KONG, Nov 15 (Reuters) - Fund managers looking at three big Hong Kong IPOs that kicked off marketing on Monday say differing investor demands should ensure ample appetite for an estimated US$4 billion in new shares.

"They won't battle each other for funding. They are targeting different investors," said Norman Ho, a fund manager at Value Partners, which manages US$2.2 billion.

Hong Kong's Housing Authority plans to raise about $3 billion by privatising its 151 shopping malls and 79,000 car-park spaces by selling units in a real estate investment trust (REIT).

The IPO is the world's third-largest this year, behind the $4.4 billion listing by Belgacom and the $3.4 billion sale by Japan's Electric Power Development Co. Ltd.

With a seemingly endless inflow of funds having driven the benchmark Hang Seng Index up by 27 percent in the past 6 months, and recent successful IPOs for China Power International Development Ltd. and China Netcom, investor enthusiasm is high.

Goldman Sachs, which together with HSBC and UBS is underwriting the deal, said the equity value of the Link will range from US$2.82 billion to US$3.33 billion.

That translates to a yield of 6.15 to 7.2 percent in 2006 and compares with an average yield of 3.4 percent for Hong Kong 10-year government bonds and 2.3 percent for property investment companies.

"The REIT will draw interest from fixed-income investors. It's not going to pull all the attention away from Air China and ZTE, which are in different sectors. I think there will be enough demand for all three (IPOs)," said Asia Strategic Investment fund manager James Cheng.

LIQUIDITY DRIVEN

Beijing-based Air China, the last of China's three major airlines to list, is aiming to raise US$750 million to US$1 billion by selling 2.8 billion shares, or 30 percent of its enlarged share capital.

It plans to price the deal on Dec. 9 and begin trading its shares on Dec. 16, the same day as the Link REIT, sources close to the deal said.

Fund managers said falling jet fuel prices, anticipation of a revaluation of the Chinese currency and Cathay Pacific Airways' planned purchase of 9.9 percent of the firm have boosted interest in its IPO, which is being handled by Merrill Lynch and China International Capital Corp. (CICC).

Besides sponsoring the Link REIT, Goldman Sachs is also marketing Shenzhen-listed ZTE Corp., China's number two telecoms gear maker, which plans to raise US$350 million to $400 million by selling 15 percent of its enlarged share capital next month.

Pricing is set for Dec. 2, with the shares due to list on Dec. 9, market sources said.

The firm's A shares in mainland China trade at about 20 times 2004 and 17 times 2005 earnings.

ZTE's net profit for the first nine months more than doubled to 726 million yuan (US$87.7 million) on a 66.7 percent rise of revenues to 16.33 billion yuan.

Proceeds from the Hong Kong offering will finance ZTE's research and design as well as product expansion, which management said could ensure growth of over 20 percent in its bottom line in 2005, according to a CICC report. (US$1=7.8 HK$=8.28 Chinese yuan).

Coal Producer Looks to IPOs in Shanghai, Hong Kong

BEIJING, Nov 17 Asia Pulse - Shenhua Group, China's largest coal producer, plans to raise up to 20 billion yuan (US$2.4 billion) through initial public offerings (IPOs) on the Shanghai and Hong Kong stock markets.

The proceeds will be used to expand the capacity of its existing coal mines, ports and power plants, as well as to build new ones, according to sources.

The listing is likely to take place next year, but a specific timetable has not been finalized, they said.

Earlier this month, Shenhua completed an asset reshuffle and set up a shareholding company, China Shenhua Energy Co Ltd, as its listing arm.

The spin-off company incorporated most of Shenhua's core assets, including 13 subsidiaries that are involved in the coal, power, railway and port sectors.

China Shenhua Energy boasts assets of more than 90 billion yuan (US$9.7 billion) and liabilities of over 60 billion yuan (US$6.5 billion).

The assets, however, do not include the 60 billion yuan (US$7.3 billion) coal liquefication project in the northern Inner Mongolia Autonomous Region.

The project, which will produce oil products by processing coal, is not expected to bring significant profits due to huge production costs.

"The company is pushing through the listing work and hopes to raise up to 20 billion yuan through the dual listing," said one source, who declined to be identified.

Some insiders say Shenhua is also considering listing on the New York and London markets after the dual listing goes through, if the conditions are right.

The company has picked up Deutsche Bank and Merrill Lynch as the underwriters. China International Capital Corp will be the IPO consultant.

Shenhua's spokesman refused to comment about the matter.

Zhang Wenxian, an analyst with Guotai Jun'an Securities (Hong Kong), said Shenhua's listing would be an attractive proposition.

"The time is favourable given the current coal price hikes," said Zhang. "The subscription would be very active."

China's coal prices have surged by more than 50 per cent this year due to robust demand for power.

On the back of the surge, key State-owned coal enterprises posted year-on-year profits of more than 160 per cent in the first three quarters of 2004.

Shenhua is the fifth-largest coal producer in the world. The company produced more than 100 million tons last year.

It is ambitiously attempting to become a flagship energy conglomerate in China.

According to the company's blueprint, Shenhua wants to increase its annual output capacity to more than 200 million tons by 2010.

It also wants to control a power generating capacity of 20 million kilowatts and produce 10 million tons of oil products from its coal liquefication projects.

In another development, Shenhua signed an agreement with Royal Dutch/Shell and Ningxia Coal Industry Co Ltd on Monday to work together to develop liquid fuel from coal.

Shenhua plans to invest 30 billion yuan (US$3.6 billion) to build a coal liquefaction plant in western China's Shaanxi Province, with a first-phase output of 3 million tons, according to a Shell statement.

(XIC)

Chinese medicine firm markets $112 mln Hong Kong IPO
By Daisy Ku

HONG KONG, Nov 17 (Reuters) - China Shineway Pharmaceutical Group Ltd., which makes traditional Chinese medicines, is marketing a Hong Kong IPO worth up to US$112 million, according to a sales document obtained by Reuters on Wednesday.

The deal, which is competing for Hong Kong investor attention with a slew of sizeable IPOs planned over the next few weeks, is being underwritten by Cazenove Asia Ltd..

Shineway, a privately-controlled firm based in the northern province of Hebei, will price its offering on Nov. 27, with shares set to begin trading on Hong Kong's main board on Dec. 2.

The company generated profit last year of 151 million yuan (US$18.2 million) on turnover of 604 million yuan, and expects to earn a profit of at least 250 million yuan in 2004.

China's traditional medicine sector, worth 75 billion yuan in 2003, is highly fragmented, with the 10 largest participants accounting for just over 20 percent of the market, according to government statistics cited in the sales document.

The company is offering 200 million shares, or 25 percent of its enlarged share capital, at HK$3.55-$4.36 each.

Of the IPO shares, 90 percent will be marketed to institutional investors and 10 percent to the Hong Kong public.

Heavy demand for shares in China Netcom's US$1.13 billion deal and a 10 percent first day gain in Hong Kong on Wednesday showed local investors remain keen for select IPOs.

Hong Kong investors have plenty to choose from: The city's Housing Authority plans to raise roughly US$3 billion by selling a real estate investment trust that is set to price on Dec. 11 and begin trading on Dec. 16.

Beijing-based flag carrier Air China is marketing an IPO worth up to US$1 billion, which is set to make trading debuts on Dec. 16 in Hong Kong and London. China's second-largest telecoms gear maker, ZTE Corp. , plans a Hong Kong listing worth US$350-$400 million, with shares set to trade on Dec. 9.

Banks brace for two big share offers
Problems feared in handling the flood of applications for Link Reit and Air China's IPOs
Peggy Sito, Hui Yuk-min and Anette Jönsson
19 November 2004
South China Morning Post

Banks are anticipating huge problems in handling the expected flood of applications from retail investors when two red-hot listings come on the market next month.

The initial public offerings of Link Reit, Hong Kong's first real estate investment trust, which is expected to raise between $22 billion and $25 billion, and Air China's bid to raise up to US$1 billion are both scheduled for December 6.

Sources said last night that the receiving banks had asked Air China's underwriters to consider delaying its IPO by one day to avoid chaos.

Earlier the banks said they would need more time to process the retail portion of Air China's offering with the strong response expected for Link Reit.

A spokeswoman for the Bank of China (Hong Kong), one of the receiving banks for both issues, said she was unable to comment on the IPOs.

Link Reit and Air China are expected to start trading in Hong Kong on December 16. According to fund managers, Merrill Lynch is forecasting Air China's net profit to grow by 14 per cent in the next year, largely fuelled by the carrier's expansion after the IPO. Merrill Lynch and China International Capital Corp are the sponsors for the Air China IPO.

Link Reit comprises a portfolio of the Hong Kong Housing Authority's 151 malls and 79,000 parking spaces in the territory. Underwriters expect the offering to be oversubscribed more than 10 times.

A key attraction is a dividend yield which could be as high as 7.3 per cent, according to analysts.

To make sure the price is affordable for small-scale investors, each board lot of Link Reit will comprise just 500 to 1,000 shares, following the example of the MTR Corp privatisation in 2000.

"When MTR Corp offered its shares, each board lot was only 500 shares," said a source close to the deal, who stressed that the size of the Link Reit retail offer had not yet been finalised.

Another source said the retail portion would be sizeable but was unlikely to be as high as 50 per cent. The precedent set by MTR Corp and the Tracker Fund showed that the government would try to maximise public participation, he added.

"It is understood the retail shops owned by the Housing Authority are not as good as those owned by private developers, in terms of location and design," said a senior executive of a private developer.

However, the attractiveness of the offering was the potential decline of the operating costs, which would in turn secure a stable income return, he said.

"Most investors are looking at an anticipated improvement of the stable return as the cost-to-income ratio is expected to drop after the privatisation," he said.

Usually the ratio is only 20 per cent for private developers. Some reach 30 per cent, but the cost-to-income ratio of the portfolio owned by Link Reit is as high as 50 per cent.

Link Reit has drawn interest from tycoons such as Henderson Land Development chairman Lee Shau-kee, who has been reported as planning to spend $1 billion buying into the trust. Sino Land chairman Robert Ng Chee Siong also said he was studying its potential.

November 21, 2004
Hong Kong: biggest overseas financing market for mainland businesses

http://english.peopledaily.com.cn/images/en/top_logo_e.gif

The gross stock value in Hong Kong of listed companies from the Chinese mainland could grow by 50 percent in the next five to ten years, said a stock market insider here Saturday.

Speaking at China Securities Market Annual Meeting, Cao Qin from the Hong Kong Stock Exchange, said Hong Kong has become the biggest market for China's mainland businesses.

At the end of September, Hong Kong had 1,080 listed companies, 282 from the Chinese mainland.

In 1993, the Tsing Tao Beer Co. Ltd. became the first mainland company to enter the Hong Kong stock market. Since that time, the gross stock value of mainland businesses has risen to 1.7 trillion HK dollars (about 194 billion US dollars), more than one third of the market's total value, said Cao.

She said Hong Kong investors show a keen interest in mainland businesses and are fully confident about the mainland's economic development.

Six of Hong Kong's top 20 listed companies are from the Chinese mainland, including China Mobile (second) and China National Offshore Oil Corp. (eighth).

However, Hong Kong's stock market also welcomes the small and medium-sized enterprises from the country's interior areas, noted Cao, who added that as a matter of fact, most mainland enterprisescollect a fund of less than one billion yuan (about 120 million US dollars) from the market.

Cao said that according to the rough analysis of Hong Kong Stock Exchange, the gross stock value of mainland listed companies will increase by 50 percent by 2014.

The shared language and cultural backgrounds, in addition to the geographical advantages, make Hong Kong a major financing channel for mainland companies, acknowledged Cao, and equally the HK investors tend to pay more attention to the stocks of the mainland enterprises.

Ranking eighth in the world, the Hong Kong Stock Exchange is a major channel through which overseas investment can go to China's mainland businesses.

Source: Xinhua

HK bourse widens base
Vanson Soo, Hong Kong Standard
23 November 2004

The Hong Kong stock market has evolved from being property-dependent to a more diversified structure with the increasing presence and importance of mainland companies, according to a recent study released by the Securities and Futures Commission (SFC).

Classification by the Hong Kong Exchanges and Clearing shows the property sector accounted for 11 per cent of the total market capitalisation at the end of June. That was down sharply from the 31 per cent recorded at the end of 1996, Joseph Lee and Joanna Poon of the research department of the SFC's supervision of markets division said.

The importance of the finance sector has risen, as its share of total capitalisation increased to 37 per cent in June, from 23.2 per cent in 1996.

"The rise was the result of growth of HSBC and the listings of Bank of China (HK) and Standard Chartered Bank over the period," the analysts said.

The findings were also reflected among the top 10 listed companies at the end of June, with fewer companies in property and more in finance sectors, and more mainland companies.

The presence and importance of mainland stocks on both the main board and Growth Enterprise Market have grown in many ways in the past eight years. There were 177 mainland stocks listed in Hong Kong at the end of June, accounting for 16.6 per cent of the total, compared with 69 representing 11.8 per cent of stocks listed at the end of 1996.

Mainland stocks accounted for 27.7 per cent, or HK$1,538.4 billion, of market capitalisation at the end of June, up from 8.5 per cent or HK$294.8 billion at the end of 1996.

The turnover of mainland stocks totalled HK$1,594.9 billion for the 12 months ending June, or 42.1 per cent of total turnover. In 1996, they accounted for just 11.4 per cent with a HK$160.3 billion turnover.

The report said the presence of mainland stocks has also widened the breadth of the market and offered more choices to investors. Of the mainland companies listed on the main board at the end of June, 49.6 per cent were consolidated enterprises, 29.3 per cent were from the industrial sector and 15.8 per cent from the finance sector.

Air China pricing $1.1 bln IPO at discount to rivals
By Daisy Ku and Wendy Lim

HONG KONG, Nov 24 (Reuters) - Air China, the country's flag carrier, plans to raise up to $1.1 billion in a Hong Kong and London listing by offering its shares at a discount to its domestic peers, sources close to the deal said.

Beijing-based Air China Ltd., the biggest and the last of big three China airline groups to be listed, will offer 2.8056 billion shares at HK$2.35-$3.10 each, giving it a market value of US$2.724 billion to $3.593 billion, according to a preliminary marketing document seen by Reuters on Wednesday.

That translates into a 2005 price-to-earnings range of about 8.8-11 times for the state-run airline, a source said.

At the mid-point of the indicative range or 10 times forward P/E, shares in Air China will be sold at a 16 percent discount to Shanghai-based China Eastern Airlines' 11.9 times and a 40 percent discount to the 16.7 times P/E of Guangzhou-based China Southern Airlines'.

Hong Kong's Cathay Pacific Airways , which said last month it will buy 9.9 percent of Air China when it lists, has a 2005 P/E of 10.2 times.

Air China, which absorbed China Southwest Airlines and Zhejiang Airlines in 2003, was the first big carrier to complete the integration of its mergers under a broad consolidation of China's fragmented airline industry.

That gives Air China higher domestic and international load factors than rivals, its underwriters have said.

In the first half of 2004, Air China generated return on equity of 20.6 percent, versus China Eastern's 4.4 percent and China Southern's 13.9 percent -- despite paying income tax at a higher rate than its rivals, according to Merrill Lynch , co-sponsor of the deal.

Air China has a 35 percent market share of China's 20 busiest domestic routes, and 51.4 percent share of China's international market, operating over 460 overseas flights a week.

Its fleet of 136 aircraft has an average age of 8 years.

Air China's free cash flow is expected to turn to a deficit of 820 million yuan (US$99 million) and 58 million yuan in 2005 and 2006, respectively, when it takes delivery of 46 passenger planes and 5 freighters to meet growing demand.

The carrier's capital spending is slated to surge to US$2.78 billion between 2004 and 2006, its bankers have said.

Air China's debt to equity ratio will hit 166 percent in 2004, but is expected to decline to 156 percent by 2006, lower than China Southern's 266 percent and 168 percent, said China International Capital Corp. (CICC), its other underwriter.

Shares in Air China are set to begin trading on Dec. 16.

FACTBOX-Hong Kong property trust

HONG KONG, Nov 24 (Reuters) - The Hong Kong Authority's planned US$3 billion real estate investment trust (REIT) is the largest REIT IPO and the first to be traded in Hong Kong.

The Link, which operates 151 shopping centres and 79,000 car parking spaces, is the city's largest owner of retail property.

Singapore's CapitaLand Ltd. , which will invest US$180 million in the IPO and has a five-year consultancy deal with Link, will receive a base fee of HK$19.5 million per year and a performance fee of up to HK$19.5 million.

The Link will start a marketing roadshow on Thursday and price its deal on Dec. 11. Its units are scheduled to begin trading on Dec. 16.

Goldman Sachs , HSBC and UBS are sponsors of the deal, and JP Morgan is the financial adviser.

Following are the details:
Seller: Hong Kong Housing Authority
Offering size before green shoe: 1,972,199,000 units
Offering size after green shoe: 2,188,900,000 units
Equity Value (assuming green shoe): HK$22.98-23.7 billion
Offering price range: HK$10.51-HK$10.83 per unit
Expected annualised yield in 2005: 6.28-6.47 percent
Expected yield in 2006: 6.65-6.85 percent
Estimated distributable income per unit in 2005: HK$0.1976
Estimated distributable income per unit in 2006: HK$0.7204
Net Asset Value: HK$21.9 billion
Distribution payout ratio: 100 percent
Debt: HK$8.6 billion
Cost to income ratio: 40.5 percent
Retail investors will get a 3 percent discount on the offering price.

Cornerstone investors holding about 25 percent: CapitaLand Ltd. , American International Assurance Co. Ltd., AMP Capital Investors, Fidelity Investments, Henderson Global Investors Ltd, ING Clarion Real Estate, Prudential Asset Management (Hong Kong), First State Investments, Capital Research and Management Co., Stichting Pensioenfonds APB.

* Distributable income is defined as net income less unrealised property revaluation gains, realised gains on the disposal of assets, fair value gains on financial instruments and deferred tax charges/credits in respect of property valuation movements.

Land rights dress up state IPOs
Dominic Whiting, Hong Kong Standard
November 27, 2004

China is helping to improve the balance sheets of some state-owned firms - and boosting prospects for their initial public offerings (IPOs) - by allowing them to place a value on their landholdings, according to a valuation expert.

The issue of property ownership has clouded many financial deals because so little land in the vast country has proper titles, and all of it is technically owned by the state.

The first beneficiaries of the new practice are Air China, which will list in London and Hong Kong next month, and telecoms operator China Netcom, which made its Hong Kong market debut last week.

"They're using a new system of 'authorised land' for companies the government wants to see list,'' Sallmanns (Far East) chief executive Paul Brown said.

Many state-owned firms lack titles to their real estate holdings because Beijing "allocated" them the land decades ago, before tradeable leases - or land use rights - were introduced in the 1980s.

Technically, the land and buildings they hold cannot be sold, so valuers in the past have determined the assets have no commercial value. That has reduced investor confidence and lowered the IPO price the firms can raise.

But Beijing this year began to allow big state-owned firms to gain title to their land-use rights, which are easy to value, even if the sites are leased and not technically owned. Typically land-use rights are granted for 30 to 70 years, but for valuation purposes the leases effectively give them ownership rights.

The land can then be recorded on a balance sheet, giving investors more confidence the assets could be sold if the company collapsed.

To obtain lease title authorisation, a state-owned parent firm would contribute "allocated" land it holds to the listing subsidiary in return for shares.

Authorities would grant the parent firm a land-use right for an indefinite period, which could be assigned to the subsidiary. The listing firm would then apply for it to be converted into a fixed-term land-use right.

The right to privately own property was enshrined in the constitution this year, reversing a central tenet of communism. But, in fact, freehold land does not yet exist. Most private firms, for example developers, have bought land use rights on sites that has been newly "granted" by authorities.

Companies already holding allocated land can buy a title giving proof of their land-use right. But many companies are unwilling to pay the fees.

One cash-rich firm planning an IPO turned down the chance to pay US$4 million (HK$31.2 million) to gain title to a lease on its land. The move would add US$45 million in land and building assets to its balance sheet, according to Brown. "Their mentality is 'why should we have to go and do it?'"

A recent transaction by Sinopec underlines how cloudy the issue is. The oil giant paid a net US$342 million for assets, including 3,000 service stations and petrochemical plants. But much of the land and buildings were labelled in the prospectus as having "no commercial value". Brown said the assets would be worth around two billion yuan (HK$1.89 billion) if Sinopec had land-use rights.

Markets Covet China IPOs --- Growing Array of Offerings Spurs Non-U.S. Exchanges To Tussle for Their Share
By Mary Kissel and Laura Santini
30 November 2004
The Wall Street Journal Europe

Hong Kong -- THE COMPETITION for China's initial public stock offerings often calls to mind hard-charging investment bankers. But now the world's stock exchanges are competing to get the listings, and that's no tea party either.

Executives of major exchanges practically are tripping over each other in China to hail the advantages of listing in their abodes to Chinese companies, regulators, bankers, attorneys and accountants. In the past month alone, the London Stock Exchange opened an office in Hong Kong while senior officials of stock exchanges in Toronto, New York and Singapore have been visiting China.

The prize: an expanding array of Chinese IPOs and follow-on offerings as China slowly pries open its capital markets. The spice: a tussle for market share between U.S. and non-U.S. exchanges.

Overseas listing among Chinese companies "has been building momentum for some time," says Robert Ashworth, a partner at the Freshfields Bruckhaus Deringer law firm in Hong Kong. He says the depth of the U.S. private placement market, coupled with stringent American financial regulations, have led Chinese companies and their advisers to "re-examine" where to list.

Chinese companies may list abroad to broaden their investor base, raise capital for foreign acquisitions, increase their stock's liquidity or gain international brand recognition and prestige.

The global exchanges vying for their shares are pursuing a growing market, bankers say. While Chinese IPOs currently represent only a trickle of the world's total supply, bankers say Chinese companies are likely to make up an increasingly large portion of Asia's IPOs. According to Dealogic, money raised by Chinese company listings outside of mainland China represented 6.75% of the global IPO market so far this year.

Exchanges are visiting companies and leveraging their connections with hometown lawyers, accountants and others who may provide introductions to potential clients. The Singapore Exchange's chief executive officer, Hsieh Fu Hua, says his organization keeps in touch with the Singapore government's trade and investment promotion arms, which have offices throughout China.

Local fairs, such as Shenzhen's China Hi-Tech Fair, held in October, and the Beijing International High-Tech Expo, held in May, are also popular ways for foreign exchanges to meet prospective Chinese clients. Meanwhile, smaller exchanges are setting their sights on particular niches. The Korea Stock Exchange, for instance, is focusing on attracting large-capitalization Chinese companies that aim to list in Hong Kong to get a dual listing in Seoul. The Toronto Stock Exchange is courting mining companies and small and midcap businesses.

Sensing an opportunity to take market share from their American cousins, non-U.S. exchanges in particular are stepping up their sales pitches. Mr. Ashworth, whose firm advised the LSE on opening a Hong Kong office, and other Hong Kong lawyers say more Chinese companies are considering listing on non-U.S. stock markets because of concerns about potential legal liability associated with U.S. listings. According to data from the British law firm Herbert Smith, 11.5% of the Hong Kong and mainland Chinese companies listed on the New York Stock Exchange have been hit with class-action lawsuits, while the figure for the Nasdaq Stock Market is 17.2%.

Companies also face considerable cost to comply with the accounting regulations of the U.S. Sarbanes-Oxley Act. "Obviously, a major issue for a Chinese company [listing in the U.S.] is that they'll have to adopt far more stringent internal controls and corporate governance," says Rupert Purser, head of corporate finance and advisory at accountancy Baker Tilly in Hong Kong.

A Chinese company listing in the U.S. is "going from a somewhat more loosely regulated regime in China to something at the other end of the scale in one leap," Mr. Ashworth adds.

Several Chinese IPOs this year have avoided U.S. regulation by listing in Asia or Europe or selling stock on the 144(a) private-placement market, which involves only qualified U.S institutional investors. And what is shaping up to be this year's last big IPO, which could raise as much as HK$8.7 billion, or 842 million euros, for flagship carrier Air China, is expected to be dual-listed in Hong Kong and London.

The U.S. exchanges are hardly standing still. The NYSE, which still attracts a big hunk of large-volume Chinese IPOs, has three offices in Asia and is planning to open a branch in Beijing. Nasdaq, a popular hub for Chinese technology company offerings, is considering opening an office in Beijing or Shanghai.

"The obvious way to gain entrance [to the Chinese IPO market] is to do a good job with the companies that have listed with you and, through those companies, build a network of relationships," says Noreen Culhane, an executive vice president in the global corporate-client group at the NYSE.

A problem many foreign stock exchanges face is that they haven't listed a lot of Chinese companies in the past and don't have long-established relationships with Chinese executives. The Tokyo Stock Exchange's October listing of Xinhua Finance Ltd., an affiliate of China's national news agency, for instance, was its first IPO by a Chinese company.

"We want Chinese companies to know that in Tokyo we can offer high-quality funds, and a lot of it," says Yasuo Sakuragi, head of new-listing services at the Tokyo Stock Exchange.

Hong Kong Exchanges and Clearing remains by far the most popular venue for Chinese companies' market debuts, boasting nearly 90% of the total mainland Chinese IPO listings so far this year, according to Dealogic.

Nasdaq and LSE executives have said they don't intend to compete directly with Hong Kong as a complementary listing venue. They mean to compete with each other.

Yuka Hayashi in Tokyo contributed to this article.

Friday December 3, 6:15 PM
Report: Beijing newspaper group plans to raise US$100 million in Hong Kong listing this month

(AP) Beijing Media Corp., which handles advertising for China's second-largest newspaper company, said Friday it expects to raise up to US$100 million (€75 million) in its planned listing in Hong Kong on Dec. 22.

"The company has got the green light from Hong Kong Stock Exchange for its listing," Dow Jones Newswires quoted a source familiar with the deal as saying Friday.

The initial public offering will likely shed light on how the Chinese government plans to proceed with further asset sales in its state-controlled media industry.

Beijing Media Corp. handles advertisements for four publications of the Beijing Youth Daily Group, China's second-largest newspaper company.

Hong Kong's Record $2.7 Billion REIT Draws Crowds

Dec. 6 (Bloomberg) -- Hong Kong's record $2.7 billion sale of shares in its first property trust drew more than 200 people at a single bank branch within minutes of opening on optimism the city's economic recovery will boost real estate prices.

A total of 4.5 million application forms were printed, a third more than Hong Kong's working population, the government said. Demand for funds to subscribe to the world's biggest initial public offering of a property trust caused the benchmark one-month lending rate to reach a six-week high on Dec. 3.

Hong Kong property prices are rebounding after a six-year slump, buoyed by an economy set to expand 7.5 percent this year, double the rate in 2003. Hong Kong individuals spend about 30 percent of their income on real estate investment, according to the city's Centaline Property Agency.

"The real estate market is favorable and this is boosting confidence in this IPO," said James Chan, 60, as he stood in a line of more than 200 people seeking application forms at HSBC Holdings Plc's Mongkok branch in Kowloon. "I'd better take my money out of the bank to invest because the low interest rates have shrunk my wealth," said Chan, a retiree and owner of two Hong Kong properties valued at HK$8 million ($1 million).

The real estate investment trust, managed by The Link Management Ltd., is offering to pay individuals as much as a 6.85 percent dividend yield, compared with the 0.01 percent paid on deposits at major banks in Hong Kong. The 180 government properties in the trust comprise 950,000 square meters of retail space for shops and 79,000 parking spaces.

Interest Rates

The REIT offering and a $1.1 billion IPO by Air China Ltd., the nation's biggest international carrier, boosted short-term funding needs and caused rates to rise, said Horace Kwan, director of Celestial Securities Ltd. Individual investors can submit applications for Air China until Dec. 8. The Link REIT will close its offer to the Hong Kong public on Dec. 9.

The one-month Hong Kong interbank offered rate jumped to 0.82 percent on Dec. 3, the highest since Oct. 19. The overnight Hibor provided by the Hong Kong Monetary Authority hit a seven- week high at 0.84 percent on Dec. 3.

"The Link REIT is pretty hot and many of our clients plan to inflate their orders to maximize allocations," said Kwan. "We hope the lending costs will come down a bit later this week."

The brokerage firm garnered more than HK$100 million demand for loan financing for the IPO, paying as much as HK$4 million in interest costs, Kwan said. "We also have one single order of HK$300 million on the table, depending on the lending rates we're offering."

The Hong Kong Housing Authority, the government's public housing agency, wants to sell its properties located in low- income areas to help plug a budget deficit projected in July to reach HK$5.5 billion in the financial year to end March 2006.

Discounted Price

The government is selling units in the property trust for HK$10.51 to HK$10.83 each. Hong Kong retail investors, initially entitled to 10 percent of the offer, can buy the securities at a 3 percent discount to the final price, which will be set Dec. 11, giving them a higher dividend yield.

The extra yield helped persuade Jimmy Tsui, a 37-year-old restaurant worker, to apply for the securities.

"I've never invested in the stock market before and feel this time would be safe because it's a sale by the government, not a private enterprise," said Tsui, who took a day off to collect an application form available at 63 retail banks.

The Link Management had distributed 1.1 million application forms, or a quarter of the total, as of 2:30 p.m. today, according to a banker involved.

Hong Kong retail property prices have gained an average 15 percent between December 2003 and October this year with some of the shops located in prime locations surging 50 percent, according to research data from Hong Kong-listed Midland Realty (Holdings) Ltd. Residential property prices have gained 28 percent during the period, Midland said.

AIG Purchase

American International Group Inc., AMP Ltd. and the seven other investors will buy HK$4.45 billion ($572 million) of the shares in the IPO, or 18.8 percent of the 1.97 billion units. CapitaLand Ltd., which owns Singapore's biggest property fund, will invest $180 million for about 5.9 percent of the units.

Link Management will begin trading on the Hong Kong stock exchange on Dec. 16. The company may sell an additional 216.7 million units depending on demand, boosting the offer to $3 billion, the government said.

HSBC Holdings Plc., Goldman Sachs Group Inc. and UBS AG are arranging the sale. JPMorgan Chase & Co. is the financial adviser of the Housing Authority.

Hong Kong to Price REIT at Top End in $2.7 Bln IPO

Dec. 11 (Bloomberg) -- The Hong Kong government is set to price shares in the city's first real estate investment fund at the top end of the range, raising $2.7 billion after a sale that drew 28 times more subscriptions than stock on offer, people familiar with the sale said.

The world's biggest initial public offering of its kind drew $40 billion of demand from institutional and strategic investors and $36 billion from Hong Kong individuals, the people said, asking not to be identified. The Link Management Ltd., the REIT's manager, plans to seek government approval later today to sell 1.97 billion of the units at HK$10.83 each.

"It seems the pricing has been very favorable to investors," said Chakara Sisowath, who helps manage $2 billion in Asian assets at Comgest (Far East) Ltd. and bought shares. "If the pricing results in a yield of between 6 percent and 7 percent, that isn't bad compared with U.S. Treasuries, let alone bank deposit rates."

The Hong Kong Housing Authority, which is selling the real estate investment trust, or REIT, attracted investors with a high dividend yield and the prospect of improved profitability once management of the trust's 180 properties is in private hands. The REIT plans to pay individuals a dividend yield of as much as 6.85 percent, compared with the 0.01 percent paid on deposits at major banks in Hong Kong.

Record Applications

Hong Kong individual investors submitted about 510,000 applications valued at 133 times the offer, the people said. The strong IPO subscription, which set a record in the city's history, requires the company to allocate at least 50 percent of the offer to the Hong Kong public, up from 10 percent originally.

CapitaLand Ltd, American International Group Inc. and eight other investment funds agreed to subscribe to $752 million shares and hold them for at least six months. The Link Management may sell an additional 216.7 million units to cater to demand, increasing the sale to $3 billion.

HSBC Holdings Plc., Goldman Sachs Group Inc. and UBS AG are arranging the sale. JPMorgan Chase & Co. is the financial adviser to the Housing Authority.

The Link Management plans to pay at least 72.04 Hong Kong cents a unit for the year ending March 31, 2006. Based on the highest price offered, institutional and strategic investors would receive a 6.65 percent dividend yield. Hong Kong individual investors, who can buy the stock at a 3 percent discount, would have as much as a 6.85 percent yield.

The REIT will start trading in Hong Kong on Dec. 16. The sale faces a hiccup after two Hong Kong Housing Authority tenants filed a court order this week seeking to prevent the government from selling the assets. The Hong Kong Court will decide on Dec. 13 whether to allow the lawsuit to proceed.

Separately, The Link Management said today Peter Wong will resign as chairman of the board after he accepted an executive position with Hongkong & Shanghai Banking Corp.

Hong Kong investors flock to Housing Authority IPO
Thu Dec 9, 2:40 PM ET
By Francesco Guerrera and Justine Lau in Hong Kong

Hong Kong retail investors have flocked to the $3bn listing of shops and car parks by the local Housing Authority, with nearly one in 10 citizens of the territory applying for the world's largest real estate investment trust (Reit).

The strong appetite for Hong Kong initial public offerings was confirmed as Air China, the country's flagship carrier, priced its $1bn listing near the top of its pricing range.

People close to the Reit deal said demand for the shares from individual investors had outstripped supply by more than 110 times - a level of over-subscription that is certain to ensure a strong debut for the shares of Hong Kong's first Reit.

After a frenzy of excitement that forced many investors to wait in long queues in spite of an early opening by banks yesterday morning, more than 520,000 applications had been received out of a population of 6.8m.

The high level of retail demand, driven by the high yield offered by the Reit compared with bonds or bank deposits, is set to restrict the portion of shares available to fund managers. The Housing Authority and its advisers were in talks last night to decide the final allocation but people close to the deal denied suggestions that retail investors will receive all the shares, forcing fund managers to buy after the IPO.

The offering for institutional investors closes today, with the shares set to start trading on December 16.

Small investors' interest in the Reit, which includes nearly 1m sq ft of retail space and 79,000 car parking spaces, was not damped by a court case against the deal launched this week.

Two public housing residents have applied to Hong Kong's High Court for a judicial review, saying the privatisation violated their contracts.

However, analysts said the court case, which will be heard on Monday, was unlikely to scupper the transaction.

Strong demand for both the Reit and Air China, whose IPO was 40 times oversubcribed by retail investors, has drained liquidity from the rest of the Hong Kong market.

Brokers said many investors have been selling other stocks to release funds for the two IPOs, while others had asked for high levels of margin financing.

KGI Asia, a securities firm, said it had lent HK$12bn ($1.5bn) to its clients to buy into the Reit and Air China - a record for this year.

Air China, the country's flagship carrier, raised $1.076bn after selling 31 per cent of its share capital to investors at HK$2.98 each, towards the top end of a range of HK$2.35 to HK$3.10.

Shares in the airline, which is being advised by Merrill Lynch and China International Capital Corporation, will begin trading in Hong Kong and London next Wednesday.

The Housing Authority and its advisers, JPMorgan, and the Reit underwriters, Goldman Sachs, HSBC and UBS, declined to comment on Thursday.

Hong Kong $2.7 Bln Property Trust IPO May Be Delayed

Dec. 13 (Bloomberg) -- The trading debut of Hong Kong's record $2.7 billion property trust may be delayed because of a legal challenge, a government lawyer said.

Two Hong Kong Housing Authority tenants challenged the government's right to conduct the initial public offering in the city's High Court today, disputing a sale that drew $76 billion of demand from investors. High Court Justice Michael Hartmann said he will make an ``early decision'' on whether to approve a judicial review of the government plan.

"If there is no decision by lunchtime tomorrow, it will have an impact on the IPO timetable," government barrister Daniel Fung said, clarifying a comment he made about the IPO in court earlier today.

The government-run housing authority, which is seeking to raise funds to plug a deficit, raised the maximum it sought from the sale. The tenants are also asking for an injunction to prevent shares in the property trust from trading on Dec. 16.

"Anytime there's uncertainty of course it's an issue for investors," said Chakara Sisowath, who helps manage $2 billion at Comgest (Far East) Ltd. and bought shares in the real estate investment trust. "If the court decides against the government, the government has to deal with it, not the investors."

The tenants allege Hong Kong's first REIT sale will violate an ordinance that requires the government to provide housing and other amenities to citizens. Tenants of the properties, who have enjoyed rental concessions from the government for years, have expressed concern that the sale will lead to increased rents.

Record Orders

"We're not trying to evade a statutory duty to provide accommodation," Fung said. "The whole point of the past 18 months of divesting non-core assets is to enable us to focus on providing housing."

The sale attracted a record $36 billion of orders from Hong Kong individuals and $40 billion from institutional investors. About 510,000 applications were submitted by the Hong Kong public equivalent to about 7 percent of the population. The total demand represents 28 times the size of the offer.

The court application was filed on Dec. 8, one day before the public offer of the REIT was closed. The application was "designed to put a spanner in the works of the long-scheduled IPO so as to maximize embarrassment of the Housing Authority and mount a political challenge to the government's executive policy," Fung said.

Dividend Yield

The Housing Authority attracted investors with a high dividend yield and the prospect of improved profitability once management of the trust's 180 properties is in private hands.

The Link Management Ltd., which manages the REIT, sold 1.97 billion shares at HK$10.83 each, according to a statement from the Hong Kong Housing Authority, which is selling the assets in the fund, and The Link Management Ltd., which will manage them.

The company plans to pay at least 72.04 Hong Kong cents a unit in dividends for the year ending March 31, 2006. Institutional and strategic investors will receive a 6.65 percent dividend yield. Hong Kong investors, who can buy the stock at a 3 percent discount, will get a 6.85 percent yield on their investment.

"I'm aware of the need for an early decision and I don't intend to delay on that," said Justice Hartmann.

HSBC Holdings Plc, Goldman Sachs Group Inc. and UBS AG are arranging the sale. JPMorgan Chase & Co. is the financial adviser to the Housing Authority.

Hong Kong-based law firm Barnes & Daly are representing the two tenants, Lo Siu Lan and Ma Ki Chiu.

The Standard
December 14, 2004
Hong Kong Bourse Hits New Record
Foster Wong and Lee Yuk-kei

Market value of the Hong Kong stock market has reached a record high of HK$6.58 trillion so far this year, thanks to the growing number of mainland enterprises listing on the bourse.

The local bourse's market capitalisation was 54 per cent higher than the previous record of HK$4.27 trillion reached in 1997 when the red-chip fever was in full swing, says Hong Kong Exchanges and Clearing (HKEx) chairman Charles Lee. This has made the city the seventh-largest stock market in the world, up from the eighth last year.

As of December 10, total stock market turnover hit a record HK$3.73 trillion and is now only HK$60 billion away from the previous high reached in 1997. Lee said he believes the total market turnover will hit a new record by the year-end with 10 more trading days remaining on the calendar.

Meanwhile, Hong Kong has raised a total of HK$255 billion for companies by both initial public offerings (IPOs) and secondary share offers as of December 10. The figure is expected to reach HK$280 billion by year-end - up 36 per cent over 2003.

Hong Kong is only second to the New York Stock Exchange in the amount of funds raised.

Mainland China is the key to our market's strong result. The fact that Chinese enterprises accounted for about half of Hong Kong's market turnover has already told the story,'' Lee told a seminar on Monday.

Mainland companies account for about 30 per cent of Hong Kong's market value and make up 27 per cent of the total number of 1,000-plus companies listed here.

Lee expects mainland IPOs to raise about HK$71 billion this year, accounting for about 75 per cent of the total fund raised through IPOs. The top five IPOs so far this year were all mainland firms, including the HK$16.49 billion offering from Ping An Insurance. Hong Kong has raised a total of HK$889 billion for mainland enterprises since 1993 when the first red chip made its debut here. Hong Kong has been and will still be an effective investment channel for many overseas investors to participate China's fast economic development,'' HKEx chief executive Paul Chow said.

Hong Kong Court Dismisses Case Against Property Fund

Dec. 14 (Bloomberg) -- The Hong Kong High Court dismissed a lawsuit by two tenants of the city's Housing Authority, removing a hurdle in the way of a record sale of $2.7 billion of assets in a property fund.

Justice Michael Hartmann said in his ruling today that the court conducted a judicial review of the sale of the property assets and subsequently dismissed the case. The court didn't impose an injunction that would have halted the stock's trading debut on Dec. 16.

"Investors are relieved,'' said Alice Yu, a director at Qi Yuan Asset Management in Hong Kong, which bought the REIT shares. ``There is still a chance for the applicants to appeal, and this could hurt sentiment about the stock.''

Two Hong Kong Housing Authority tenants -- Lo Siu Lan and Ma Ki Chiu -- challenged the government's right to sell property assets in the world's biggest initial public offering of a property fund, threatening a sale that drew $76 billion of demand. The tenants alleged the sale breached a housing ordinance.

Justice Hartmann said the sale is within the powers of the authority. It will not prevent tenants from using retail and ancillary amenities of the housing estates under new ownership, he ruled.

Balancing Books

"The substantive application therefore must be dismissed,'' said Justice Hartmann in the ruling. The IPO "may actively and positively assist the authority in the attainment of the purpose of the ordinance, especially if it's remembered that the authority is under a statutory obligation to raise revenue itself so as to meet its goal, that is to balance its books.''

The government's public housing agency plans to use the sale's proceeds to plug a deficit it projected in July will amount to HK$5.5 billion in March 2006.

The authority's spokeswoman Mary Li said the government needs to ascertain if the tenants will appeal the decision before deciding whether the listing will go ahead on Thursday. No decision will be taken on whether to appeal the decision until the lawyers for the tenants have had time to read the written judgment, which will be available at 10:30 a.m. tomorrow.

Social Contract

The IPO attracted a record $36 billion of orders from Hong Kong individuals and $40 billion from institutional investors. About 510,000 applications were submitted by the Hong Kong public, equivalent to about 7 percent of the population. The total demand represents 28 times the size of the offer.

The government's lawyer, Daniel Fung, told the court "a significant proportion'' of those investors are likely to have borrowed money on margin to finance their applications. Any delay or cancellation of the sale may prompt those margin facilities to be called in short notice.

"I acknowledge that public interest may well include the interests of the financial community,'' Hartmann said.

The lawsuit applicants said the housing ordinance obliges the authority to secure the provision of facilities, including car parks and retail outlets, by maintaining control of them. Justice Hartmann overruled the argument, citing an English court case which allows a local authority to provide its transport service through a third party.

"The court must have considered the public interest before making the judgment,'' said Claudius Tsang, an investment manager at KDB Asia Ltd., which bought shares in the sale. "Still, investors won't be relieved until Thursday because the tenants may file an appeal.''

No Obstacle

Government lawer Fung said he welcomes the court's decision to approve the legality of the asset sale.

"I'm thankful for the judge making an expedited decision on this crucial issue,'' Fung said. "There is no obstacle to the listing.''

Albert Cheng, a Hong Kong legislator who supported the lawsuit, said he won't help fund an appeal.

"My support has ended here as my personal (financial) ability is limited,'' Cheng said.

Tenants of the properties, who have enjoyed rental concessions from the government for years, are worried that the sale will lead to increased rents.

"I'm concerned prices are going to go higher,'' said Ng Wing-chak, 68, before the ruling. Ng lives in a government housing estate in the district of Kwai Chung and was in court today.

HSBC Holdings Plc., Goldman Sachs Group Inc. and UBS AG are arranging the sale. JPMorgan Chase & Co. is the financial adviser to the Housing Authority.

Hong Kong-based law firm Barnes & Daly represented the tenants.

Hong Kong Government Delays $2.7 Billion Real Estate Trust IPO

http://the-sun.com.hk/tsnmain/20041215/img/1215main.jpghttp://210.177.167.146/orimain/img/041215odn_over.jpg

Dec. 15 (Bloomberg) -- Hong Kong's government postponed listing the shares of the city's first real estate investment trust to Dec. 20 because of concern about a legal challenge.

Hong Kong's High Court yesterday dismissed a lawsuit by two tenants of the city's Housing Authority after Justice Hartmann said the sale is within the powers of the authority. The delay is due to a possible appeal to the court decision, said Mary Li, a spokeswoman for the Housing Authority, which is selling the REIT.

Wednesday December 15, 7:57 PM
Air China Stock Gains 8% on Debut
By Ruby Chan

HONG KONG (Dow Jones)--Air China Ltd.'s (0753.HK) stock gained 8% on its debut on the Hong Kong stock exchange Wednesday, and analysts said there is scope for slight further gains riding China's boom in passenger and cargo traffic.

The shares closed at HK$3.225, up 8% from their initial public offering price of HK$2.98, after opening at HK$3.15. Trading volume was 729.2 million shares - the fourth highest in the bourse for the day - with the Hang Seng Index ending 0.3% higher at 14078.54 points.

"The subscription level suggested high demand for the stock but its debut price was slightly below our expectation of HK$3.25-HK$3.30," said Phillip Asset Management's Y.K. Chan.

But he expects the stock to rise to 10% over its IPO price by the end of the year on robust growth of air traffic in China and falling oil prices.

"Air ticket bookings are good. It's hard to find seats in the Asia Pacific region," said an aviation analyst in a foreign investment bank.

China International Capital Corp., a joint global coordinator and joint bookrunner of the listing, said in a research report that air traffic growth has been driven by leisure air travel demand on the back of the rising affluence of urban households.

"Air China has a well-balanced network. It also has a stronger footprint in Hong Kong and Macau compared with China Southern and China Eastern. Air China's flights to these two destinations are more frequent than the other carriers," said Alan Zhong, a Shanghai-based analyst at UOB Kayhian.

Based in Beijing, Air China has a fleet of 136 aircraft serving 69 domestic and 34 international destinations.

The carrier accounted for 30% of China's 2003 total RTKs, or the revenue load in tons multiplied by the kilometers flown, an industry yardstick.

Asked by reporters how he thought the listing went, Air China Chairman Li Jiaxiang replied: "We are happy."

Air China's shares will be also listed in London late Wednesday, making it the first Chinese company to make a listing in the U.K. in recent years.

Li said Air China chose London over New York for its dual listing as the carrier has greater exposure to European destinations.

Air China is the third mainland carrier listed in Hong Kong after China Eastern Airlines Ltd. (CEA) and China Southern Airlines Co. (ZNH), both in 1997.

Air China raised HK$8.36 billion by offering 2.806 billion shares. The proceeds will be used buy 10 Airbus and four Boeing aircraft, as well as to repay debts. In its prospectus, Air China said its future operating cash flow and proceeds from the IPO may not be sufficient to meet a planned capital expenditure of CNY14.9 million to upgrade and expand its fleet from 2004 to 2006.

The IPO price of HK$2.98 was fixed near the top of an indicative range of HK$2.35 to HK$3.10, representing a price/earnings ratio of 12.4 times based on the carrier's forecast net profit for this year.

This is lower than China Southern Airlines' P/E of 19.4 times but slightly higher than China Eastern Airlines' P/E of 11.7 times.

"Air China's P/E isn't cheap. If you take out depreciation and operating lease expenses, the P/E is about the same as China Eastern's and China Southern's," said the analyst.

Air China has said it expects a strong rebound in 2004 earnings from last year - when China was hit by the SARS epidemic - with net profit likely to rise to CNY2.3 billion from CNY159.6 million last year.

Last month, Cathay Pacific Airways Ltd. (0293.HK), Hong Kong's de facto airline, signed a memorandum of understanding to buy 9.9% of Air China's IPO shares.

"Air China's cost efficiency and management is better than China Southern and China Eastern, but isn't as good as Cathay, so Cathay's strategic investment will help Air China," said another aviation analyst.

Air China holds 69% of Hong Kong-listed China National Aviation Co. (1110.HK), a holding company that has sizable interests in Hong Kong carrier Dragonair and Air Macau. CNAC also has shares in Shenzhen-listed Shandong Airlines Co. (200152.SZ) and Shenzhen Airlines.

The retail portion was covered 83 times and increased to 40% from 10% of the offering. The institutional tranche was 40 times covered after the clawback.

South China Morning Post
December 16, 2004
HKEx triples staff bonuses as trading volume hits record
Hui Yuk-min

Hong Kong Exchanges and Clearing (HKEx) will triple this year's staff bonuses after breaking a turnover record set in 1997.

Some 800 HKEx employees are set to receive a bonus cheque three times the amount they received last year, plus a moderate 2.5 per cent pay rise, the exchange said in a statement yesterday.

The news came after the exchange said it had set a new year-to-date turnover record of $ 3.789 trillion, exceeding the annual turnover record set in 1997 by about $ 913 million.

Chief executive Paul Chow Man-yiu said the exchange had set aside $ 50 million for year-end bonuses to reward the hard work of its staff throughout the year.

HKEx paid out $ 16 million in bonuses last year.

"Our staff will be getting an average bonus of 1.25 months' salary," Mr Chow said at a ceremony for Air China's listing debut. "Out-performers will receive higher bonuses."

A reserve of $ 5 million of the $ 50 million was set aside as special bonus to be shared among a group of outstanding staff, said Mr Chow.

HKEx also said that it would raise salaries for the first time since July 2000, about the time the dotcom bubble burst and turnover slumped.

"The board of directors had approved to increase total staff costs by 4 per cent for next year," said Mr Chow. That translates into a minimum 2.5 per cent salary rise.

As of yesterday, a total of $ 264.7 billion had been raised this year in Hong Kong through initial public offerings and secondary offerings, including the listing of Air China and the share offering of Gome Electrical Appliances Holdings chairman Wong Kwong-yu this week.

The IPO rush showed no signs of slowing down, said Mr Chow.

"We're currently processing about 50 applications for new listings, and a lot of are sizeable companies," he said. "Unless there is a substantial change in the environment, I don't see any slowdown in IPO applications."

According to Thomson First Call, analysts are forecasting HKEx's current year net profit to grow by 37.95 per cent to $ 954.33 million, with turnover rising 12.69 per cent to $ 2.27 billion.

Meanwhile, HKEx will implement the first-phase trial in reducing minimum spreads in the second quarter of next year in an effort to increase market liquidity.

A total of 20 stocks that are priced at more than $ 30 will be affected in the trial.

December 19, 2004
Government Press Release
Link REIT listing postponed

The listing of Link Real Estate Investment Trust will not proceed as originally planned on December 20, Secretary for Housing, Planning & Lands Michael Suen says, adding the Housing Authority will prepare for a re-launch after all the legal impediments are cleared.

Speaking to reporters last night, Mr Suen said the decision was made after careful consideration. Investors' interest has been taken into account, he added.

Mr Suen said the two judgments delivered by the Court of First Instance and the Court of Appeal confirmed the opinion the Housing Authority had previously obtained from both local and international counsel on its power to divest.

"Since we do not know whether the applicant will appeal to the Court of Final Appeal, and how the court will rule, uncertainties remain.

"Having carefully considered the legal and other implications, the Housing Authority has decided the listing of Link REIT will not proceed as originally scheduled tomorrow morning."

He said the public will understand the move is the safest and most responsible arrangement for the investors.

"We will try to clear all the legal impediments and will prepare for a re-launch of the initial public offering as soon as possible."

Mr Suen said the Housing Authority will work in conjunction with the Joint Global Co-ordinating Banks to commence preparatory work for the re-launch.

Hong Kong's financial status suffers little after collapse of property sale
Mon Dec 20, 8:16 AM ET

http://210.177.167.146/orimain/img/041220tsn_over.jpghttp://210.177.167.146/orimain/img/041220odn_over.jpg

HONG KONG (AFP) - The shelving of a huge public property sale is an embarrassment for Hong Kong but analysts say the incident shows the territory's legal system is intact and that its reputation as a leading financial center should not suffer unduly longer-term.

The saga of the sale and listing of Hong Kong's Real Estate Investment Trust (REIT) had kept everyone on tenterhooks over the past weeks as the government and an unassuming 67-year-old public housing tenant fenced in the courts over the legality of the plan.

With the deal pulled, the market response was unequivocal. The key Hang Seng Index jumped 221.60 points to 14,214.04 as investors greeted the news with a sigh of relief the uncertainty was over.

Analysts said the crucial element was that the legal system had held to the standard of due process, the foundation of Hong Kong's claim to be recognised as an important international financial centre in its own right and for trade with a booming China.

That the legal system held up under the strain should be enough to offset any short term concerns about the territory's financial standing although on the political side, the costs may be more subtle and take longer to assess.

The three billion US dollar privatisation scheme for public housing assets was undone by a legal challenge from tenant Lo Siu-lang who argued that the deal undervalued public assets, short-changed the public and threatened to lead to rent rises for public housing tenants.

Lo, whose case was twice rejected by the lower courts, on Friday won the standard 28 days to appeal to the city's highest court against the previous rulings upholding the right of the Housing Authority's to sell the assets.

With the prospect of Lo lodging an appeal in the Court of Final Appeal, the government decided that it was better to withdraw the listing until all legal obstacles had been cleared.

How a multi-billion dollar deal by the government could be thrown into disarray by an elderly woman has obviously caused it huge embarrassment.

"Foreign investors are treating this like a joke. How can a pensioner derail the government's plans?" said DBS Vickers director Peter Lai.

The court delays tied up billions of Hong Kong dollars borrowed by a half million individual investors and institutions who signed up for the offering.

Raymond So, an associate finance professor at Chinese University, said the decision should have little impact on Hong Kong's reputation as a financial centre as the outcome shows the territory still has an independent legal system that cannot be influenced by the government.

"This shows that Hong Kong has an outstanding legal system. Even an elderly lady can challenge the government ... The rule of law is just as important as the listing itself," he said.

City University political professor Joseph Cheng echoed So's views.

"The main concern in this issue is the mismanagement by the government which appears to be very weak, easily challenged and that it failed to fulfil its plan. Here you have a case where the government is not handling the issue competently," Cheng said.

"But there is also positive outcome to this. This has shown the rule of law is still very much alive in Hong Kong ... this should not affect the fundamentals we still have as a financial centre," Cheng said.

"The uncertainty has been removed (from the marketand investors have turned their attention somewhere else ... The outcome would have been worse if the listing had proceeded," said So of Chinese University.

"If we say Hong Kong's financial market has dealt a heavy blow, that would be an exaggeration. We have suffered a setback and it was an isolated case but I hope the government will now learn from their mistakes," he added.

Wednesday December 22, 4:48 PM
Hong Kong govt may relaunch property privatisation scheme in late February

HONG KONG, (AFP) - Hong Kong's Housing Authority plans to relaunch in late February the major privatisation scheme of public property assets after all legal hitches that may hinder the listing are resolved, a source with the authority said.

The relaunch will only be possible if there are no fresh legal challenges to the listing before February 25, the source said.

If it makes the offer in February, the authority may need to review the valuation of the Link Real Estate Investment Trust (REIT) assets under Hong Kong's listing regulations.

The three billion dollar trust sale was postponed indefinitely late Sunday after 67-year old welfare recipient Lo Siu-lang's challenge in the courts tied the listing in legal knots.

The government had wanted to privatise 180 public housing estate shopping malls and 79,000 associated car parks through the property trust but Lo and her supporters claimed the deal undervalued the public assets. They also feared the sale would lead to a rise in public housing rents.

Meanwhile, a group of disgruntled investors took out full-page newspaper ads blaming outspoken lawmaker Albert Cheng for the legal challenge that halted the property trust sale.

The ads blamed the talkshow host-turned legislator for backing Lo's bid to scrap what would have been the world's largest REIT.

Signed by a "group of people in the financial service sector" the ads accuse Cheng of putting at risk Hong Kong's reputation as an investment centre and making the city a laughing stock.

"The Link REIT set out to be beneficial to Hong Kong people but is now dragged down," Alex Tsui, one of the signatories and a columnist for Oriental Daily News, told The Standard newspaper.

Tsui called on angry investors affected by the REIT's cancellation to stage a protest against Cheng on New Year's Day.

Cheng, who helped fund the legal challenge, said he had no regrets.

"As a social activist I am always prepared for attacks against me," he was quoted as saying in The Standard.

December 22, 2004
Government Press Release
2004 securities market sees all-time highs

Hong Kong's securities market set a number of new records in 2004, with the market turnover amounting to $3.79 trillion as at December 15, $3.9 billion more than the previous record set in 1997.

Trading values of H shares and derivative warrants as well as the number of newly listed derivative warrants are also at all-time highs.

According to the Market Statistics 2004 published by the Hong Kong Exchanges & Clearing Limited today, the trading values of H shares and derivative warrants amounted to $914.2 billion and $497.1 billion. A total of 1,197 newly listed derivative warrants were recorded.

The amount of market capitalisation also reached an all-time high ¡V $6.65 trillion as at December 2. The figure for the Main Board as at mid-December was $6.5 trillion, up 19% from the $5.48 trillion at end-2003.

HK ranks third in raising equity funds

Hong Kong's equity funds raised in the first 11 months of this year hit US$31.7 billion, ranked third when compared with other overseas exchanges. New York topped the list with the amount of equity funds raised at US$107.3 billion, followed by Spain, at US$38.5 billion.

In terms of the market value of shares of domestically listed companies, Hong Kong ranked ninth, with a market value of US$847 billion. New York again ranked first, with a market value of US$12.3 trillion. Nasdaq and Tokyo followed with market values of US$3.43 trillion and US$3.38 trillion.

New records were also seen in the derivatives market, with the number of contracts relating to futures and options amounting to 18,734,315 as at mid-December, up nearly 29% from the previous record. The number of contracts relating to stock options and Hang Seng Index futures stood at 5,416,902 and 8,109,139, representing a surge of about 28% and 19%.

As at mid-December, there were 888 listed companies in the Main Board and 204 in the Growth Enterprise Market, up 4% and 10% over end-2003. Among the companies, 45 in the Main Board and 21 in the GEM were newly listed.

On listed securities, a total of 2,006 items had been recorded so far. Derivative warrants accounted for 45%, equities 44.5% and debt securities 8%.

Average daily turnover up 54%

The Main Board's total turnover reached $3.77 trillion as at mid-December, a surge of 48% over end-2003. The average daily turnover was $15.8 billion, up 54% over the 2003 figure.

Changes were also recorded in closing indices. The Standard & Poor/HKEx LargeCap Index was 15543.96, a change of 14% compared with the 2003 figure. The Hang Seng Index also went up 12% from 2003, to 14078.54.

HSBC ranked first in the 10 largest Hong Kong-listed companies, with a turnover of $358.99 billion. Ping An Insurance's H-share listing was the largest initial public offering for newly listed companies, with a total of $14.34 billion raised.

Regarding the performance of Mainland enterprises, there were 301 listed issuers as at mid-December, with a market capitalisation of $2 trillion. This represented an increase of 19% over the 2003 figure. Among the issuers, 41 were newly listed.

The average daily equity turnover was $6.79 billion, up 60% from the 2003 figure.

HKEx aims to finalise dual China list process in '05

HONG KONG, Jan 7 (Reuters) - The Hong Kong stock exchange aims to finalise details for a dual listing system this year that would allow companies to float their shares simultaneously in China and Hong Kong, cutting costs in the process, a top HKEx official said on Friday.

Companies have been able to carry out dual lists in Hong Kong, New York and London but such a mechanism has not been established in China due to the country's rigid listing process and sharp variations in the valuation of stocks in China and Hong Kong.

Under the present system, companies who want to list in Hong Kong and Shanghai have to file separate applications and meet different regulations. Yuan-denominated A shares are companies listed in China, while H shares are those registered in China but listed in Hong Kong.

"This subject (dual listing) has been discussed with the relevant authorities in China," Paul Chow, chief executive of Hong Kong Exchanges and Clearing (HKEx) told reporters at a news conference.

"The hurdles involved include differences between share prices in the A-share and H-share markets, as well as listing timetable procedures," added Chow.

Chow said the HKEx aims to iron out these obstacles with Chinese regulators, the Securities and Futures Commission and the Shenzhen and Shanghai stock exchanges.

"Hopefully, we'll be able to finalise details for the mechanism this year," Chow said.

Separately, the Hong Kong bourse operator said it had a bumper 2004. Helped by huge fund inflows -- amid speculative plays on a possible yuan revaluation and for a raft of IPOs -- into the city's banking system, the exchange's main board posted a total market capitalisation of HK$6.63 trillion (US$850 billion) as of the end of 2004.

Average daily turnover jumped 54 percent to HK$15.86 billion in 2004 from the previous year.

Forty-nine companies, including high-profile Ping An Insurance , Semiconductor Manufacturing International Corp , and China Netcom listed on the city's main board in 2004, raising funds of HK$93.1 billion.

(US$1=HK$7.8)

Wednesday January 12, 04:06 AM
China's Shenhua wins CSRC approval for Hong Kong listing - report

BEIJING (AFX) - Shenhua Group, China's largest coal producer, has received approval from the China Securities Regulatory Commission (CSRC) to list in Hong Kong, the Shanghai Securities News reported.

Citing an unnamed official, the newspaper said Shenhua Group submitted an overseas listing application at the end of last year and received approval earlier than anticipated.
It said the company also expects to list in Shanghai in the first half of this year.

State media reports said earlier that Shenhua Group is planning a simultaneous initial public offering in Hong Kong and Shanghai to raise up to two bln usd in Hong Kong and one bln in Shanghai.

The Shanghai Securities News said today that the group expects to raise 12 bln yuan from a domestic A-share listing, and plans to sell a 25 pct stake through the dual listing.

In November last year, Shenhua Group underwent an asset restructuring and set up a listing arm -- China Shenhua Energy Co Ltd -- incorporating 13 subsidiaries involved in the coal, power, railway and port sectors.

Last May, citing Shenhua Group's president Chen Biting, state media said the group expected to produce 130 mln metric tons of coal last year, up 30 pct year-on-year from 100 mln metric tons in 2003.

(1 usd = 8.3 yuan)

January 13, 2005
Government Press Release
2004 impressive year for public offerings

Last year was impressive for initial public offerings in Hong Kong, the third largest centre for raising money through equity funds, Monetary Authority Chief Executive Joseph Yam says, adding the possibilities for further developing IPO, the channel of financial intermediation, are worth pondering.

In his latest Viewpoint column posted on the authority's website today, Mr Yam said despite the unfortunate events surrounding the IPO of the Link Real Estate Investment Trust, Hong Kong was one of the largest centres in the world for the amount of IPOs organised last year.

"This is quite an achievement. There is also a good chance that Hong Kong will maintain that status in the years to come, and even aspire to move higher in this ranking, if we play our cards right," he said.

Mr Yam said the Mainland relies too heavily on the banking system for intermediating funds and has an urgent need for diversification of financial intermediation channels, for financial stability and efficiency, and economic development reasons. The development of the debt and equity channels on the Mainland has also been slow.

World-class platforms

Mr Yam said Hong Kong has ready-made, world-class debt and equity trading platforms that command the confidence of international investors, but the Mainland's continuing exchange controls may hinder investors there to raise funds offshore.

"While Mainland enterprises are given permission, on a case-by-case basis, to raise funds offshore, for example in Hong Kong, there is no mechanism yet to allow the many individual or institutional Mainland investors to invest outside of the Mainland. And so the listing of Mainland enterprises on the Hong Kong stock market only attracts, and leads to the inflow of, foreign (including Hong Kong) funds.

"If somehow a way could be found to build on this strength and to cater for the demands of investors on the Mainland without significant adverse effects on exchange control, Hong Kong's role as an international financial centre could be reinforced."

Mr Yam said there is a need to explore options for achieving this. This is not just a matter of maintaining Hong Kong's status as an international financial centre, but more important, a matter of meeting a pressing urgent need on the Mainland.

"I am sure we have the financial architects and engineers in Hong Kong who can think of imaginative initiatives to serve the specific needs of our country."

HK Stock Market Ranked 9th In The World In 2004

HONG KONG, Jan 26 Asia Pulse - Hong Kong's stock market became the ninth largest in the world and ranked third in total funds raised last year, the latest issue of BOCHK's Monthly Economic Review said.

Among the major records set in 2004, Hong Kong's total market capitalization surged to 6,695.9 billion HK dollars (US$858.45 billion), or 4.5 times of the GDP. Total turnover topped 3,974.1 billion HK dollars (US$509.5 billion), and the number of listed companies climbed to 1,096, the Review said in its January issue.

More records were broken in terms of trading value of H shares, derivative warrants, the number of newly listed derivative warrants and the number of total futures, options, stock options and Hang Seng index futures contracts, the review said.

However, the Hang Seng Index failed to make new high that stoodout among all these records, the note added. It is firstly due to the bear market that lasted for more than three years even though more companies were listed. And among the HSI's constituent stocks,11 or one third have been replaced during the period.

The review also pointed out that judging from their proportion in the overall market in terms of number, market cap, turnover andfunds raised, Chinese companies are playing an increasingly dominant role in Hong Kong's stock market. The note expected that more Chinese companies will continue to flock to Hong Kong to raise funds.

(XIC)

Shanghai Electric seeks HK listing
Diversified manufacturer aims at raising US$500m to fund power equipment capacity expansion
Eric Ng
28 January 2005
South China Morning Post

Mainland industrial equipment giant Shanghai Electric Group is planning a US$500 million initial public offering in Hong Kong, sources said yesterday.

The heavily diversified manufacturer aims to list most of its main operating assets. These include factories making equipment for power generation and transmission, rail transport, environmental protection, printing and indoor climate control.

The listing will be sponsored by Credit Suisse First Boston, with marketing to begin in March. The company has filed its listing application with Hong Kong Exchanges and Clearing.

Analysts say the firm is keen to raise capital for capacity expansion to meet growing demand for power generation equipment.

Crippling electricity shortages over the past two years have sparked a frenzy of power plant construction. Uncompleted orders at rival Harbin Power Equipment had swollen to 15.14 billion yuan in June last year, about three times its turnover last year.

A UBS research report says China plans to increase its generating capacity 13.8 per cent this year and a further 9.6 per cent next year. The country's 435,000-megawatt capacity at the end of last year is projected to rise to 680,000 MW by the end of the decade.

Many power producers have been pushing ahead with construction projects without proper approval, triggering concerns about a capacity glut within a few years. The National Development and Reform Commission in October last year ordered a crackdown on power projects launched without proper approval, estimated to have a combined capacity of more than 100,000 MW.

For now, however, China's vast economic machine remains woefully underpowered. Electricity rationing has been instituted in 21 provinces and regions this month, the depth of winter, the State Grid Corp of China says.

Although power shortages have boosted production equipment sales, margins have been eroded significantly by rising steel costs.

Harbin Power's gross margin fell to 7.9 per cent in the first half of last year from 14.34 per cent a year earlier as raw material costs soared as much as 50 per cent.

"Contract bidding in the industry is very competitive, leaving equipment makers with little pricing power against power producers," said Kim Eng Securities head of research Eva Chu Wen-yee. "As power producers struggle to retain profitability amid skyrocketing coal costs, the pressure will be passed on to equipment makers, which themselves face higher steel costs."

Prices of steel plates and rolled sheets, the main raw materials in power equipment production, rose between 20.8 per cent and 27 per cent last year from 2003, according to BOC International.

In addition to its power equipment plants, Shanghai Electric has two lift manufacturing joint ventures with Japan's Mitsubishi, an air-conditioning joint venture with Carrier of the United States, and a train car joint venture with France's Alstom.

It has also teamed up with Swedish-Swiss equipment giant ABB to make transformers and low-voltage motors in Shanghai, and with Germany's Siemens to manufacture gas turbine components.

Three of the group's subsidiaries are already listed in Shanghai.

HKEx sets sights on Japanese companies
Exchange steps up efforts in persuading parents to list their mainland units here
Enoch Yiu
29 January 2005
South China Morning Post

Hong Kong Exchanges and Clearing is stepping up efforts to woo Japanese firms to list their mainland operations in Hong Kong.

Paul Chow Man-yiu, chief executive of the exchange, said: "Many Japanese companies have business operations or joint ventures in China and it would benefit the Hong Kong stock market if these Japanese-owned mainland businesses listed in Hong Kong."

Mr Chow was speaking to about 100 representatives of Japanese companies in Hong Kong at a conference co-hosted by the exchange and Daiwa Securities SMBC Hong Kong.

HKEx executive vice-president Lawrence Fok Kwong-man noted there were only a few Japanese companies - such as financial services firm Aeon Credit, retailer Aeon Stores and music company Rojam - listed here.

But the trend would change and the exchange was redoubling efforts to draw Japanese firms, said Mr Fok, also head of its business development and investor services division.

"Hong Kong is an international market and is geographically close to China. This makes HKEx an ideal market for Japan's mainland joint ventures to list and raise funds," he said.

Over the past two years, the exchange has held seminars to encourage Japanese investment.

According to the latest market transaction survey 4 per cent of all overseas investment in 2003 was from Japan - up from 3 per cent in 2002.

A report from Daiwa Securities said that with already strong economic growth in China - running at more than 9 per cent a year - set to get a boost from spending for the 2008 Beijing Olympics, Japanese investors were becoming more interested in investing in mainland companies via Hong Kong.

Having succeeded in drawing Japanese investment, HKEx officials are confident they can build on this to lure more Japanese firms.

"We have seen a number of Taiwan companies have listed their mainland operations in Hong Kong. We would like to see the same trend with Japanese companies," Mr Chow said.

Along with HKEx chairman Charles Lee Yeh-kwong, he will lead three seminars to in Japan this year to promote the exchange.

Mr Fok said that although some mainland firms were listing in both Hong Kong and the US or Britain, most of their turnover was here. "This shows that investors like to trade the mainland enterprises shares in Hong Kong as it is the market with high liquidity."

Shanghai Port Group in talks with global banks as IPO looms closer
By Keith Wallis in Hong Kong
28 January 2005
Lloyd's List

SHANGHAI International Port Group is set to launch an initial public offering in Hong Kong later this year in a move that could raise up to $800m to finance investment in port facilities in China’s largest container port.

The Financial Times yesterday said that SIPG, the commercial port arm of Shanghai municipality, is thought to have asked four banks — such as Citigroup, Deutsche Bank, Morgan Stanley, Merrill Lynch and UBS — to bid for a contract to advise on the deal.

Cash raised from the flotation would help finance the development of the massive $10bn Yangshan port complex.

This is being built about 30 km offshore of Zhejiang province.

It would also give foreign investors a foothold into what is planned to be a 52-berth complex.

The move to list in Hong Kong comes after China Merchants Holdings (International), the Hong Kong-listed commercial subsidiary of China’s Communications Ministry, confirmed plans three weeks ago to spend Yuan5.57bn ($672.7m) acquiring a 30% stake in SIPG.

Insiders said SIPG planned to float about 25% of the company in Hong Kong.

Given the target price, this would value the whole company at $3.2bn.

This represents a premium on the price paid by China Merchants Holdings (International) for its stake.

Media reports said no decision on the timing, location and size of the IPO had yet been taken, saying that it would depend on market conditions.

Separately, Shanghai Port Container has decided to partially transfer stakes in two Shanghai logistics firms to its subsidiary in the former Portuguese enclave of Macau in southern China.

The Shanghai-listed company will sell a 10% stake in Shanghai Jixiang Freight to Shanghai Container (Macau) in a move that would reduce its shareholding to 69.84%.

Shanghai Jixiang Freight had net assets of Yuan263.54m ($32m) at the end of last year.

The firm’s board has also agreed that Shanghai Haihua Shipping should sell a 30% stake in Shanghai Haihua International Trans- portation to Shanghai Container (Macau) for Yuan7.06m.

Shanghai Haihua Shipping will continue to hold a share of 60% in Shanghai Haihua International Transport-ation when the deal is completed.

uesday February 8, 04:51 AM
China's Bank of Communications seeks 2 bln usd via Hong Kong IPO by Q2 -source

HONG KONG (AFX) - The Bank of Communications (BoComm) is seeking to raise up to 2 bln usd in an initial public offering (IPO) in Hong Kong by the second quarter of this year, a source said.

The source said the company plans to sell new shares representing 20 pct of the company. The mainland bank filed its listing application with the Hong Kong Stock Exchange Friday and has enlisted the services of Goldman Sachs and HSBC as sponsors of the listing, the source said.

The share sale of China's fifth-biggest lender is expected to be one of Hong Kong's biggest this year.

HSBC plc, which currently holds a 19.9 pct stake in the Chinese bank, is likely to buy more shares to keep its stake at current levels, said a banking analyst with an international brokerage.

'Its the most logical move, considering that HSBC aims to get more exposure in the mainland,' he said.

In a share sale by Ping An Insurance last year, HSBC through its affiliate, HSBC Insurance Holdings Ltd bought 9 pct of the shares on offer in the Chinese insurer's 2.1 bln usd IPO to maintain its 10 pct stake in Ping An.

HSBC's 19.9 pct stake in BoComm will be effectively diluted once the Chinese bank offers new shares for sale to retail investors and institutions.

The analyst said HSBC's purchase of a stake in the bank last year came with a provision allowing it to maintain its 19.9 pct shareholding, even if the company seeks a listing via an IPO.

Tuesday February 15, 7:50 PM
Report: Chinese steel maker to list on Hong Kong's stock exchange

AP - Chinese steel maker Kunming Iron & Steel Co. plans to list on Hong Kong's stock exchange next month to raise up to 2 billion Hong Kong dollars (US$256 million), the Dow Jones Newswire reported Tuesday.

"The company has received listing approval from the Hong Kong authority," and initial public offering will take place around mid-March, Dow Jones quoted an unidentified source familiar with the plan as saying.

The company is the largest steel manufacturer in the western Chinese province of Yunnan, where it has a market share of more than 80 percent, according to the source.

The company plans to raise between HK$1.8 billion (US$231 million) to HK$2 billion (US$256 million).

BoCom to scale back IPO
Elliot Wilson, Hong Kong Standard
February 18, 2005

Bank of Communications, China's fifth-largest lender, will probably scrap the Shanghai portion of its planned US$3 billion (HK$23.4 billion) initial share sale and sell stock only in Hong Kong, sources close to the deal said.

Shanghai-based BoCom now plans to sell 15 percent of its existing shares for as much as US$2 billion by late May at the earliest, the sources said.

A decision to abandon what would have been the first simultaneous mainland-overseas initial public offering reflects concern that even relatively strong mainland firms will have trouble pulling off a successful share sale in the country's depressed stock markets.

"There are serious issues about the feasibility of a Shanghai sale," one source said. "Does the local market have enough appetite for a US$1 billion IPO?" Problems with a Shanghai offering could undercut the Hong Kong sale, which will be the first overseas offering by a mainland bank.

"It's very important for this bank IPO to do well," the source said.

Scaling back the BoCom listing is just the latest sign that mainland authorities are dramatically scaling back their plans to sell stakes in the mainland's troubled banks this year. Two of the Big Four state-owned banks - China Construction Bank and Bank of China - were originally slated to sell as much as US$10 billion in shares to overseas investors, but those offerings now look set to be delayed until next year at the earliest, bankers say.

The closer the sale date, the more apparent it became that the banks' financial and managerial problems are more intractable than first thought.

BoCom, by contrast, is widely regarded as the strongest and best-run of the major banks. "I'm pretty skeptical about the banking system in China but if there is one investable [bank], it's this one," Standard Life Investments investment director Andrew Salton said. "It's large but not unwieldy, and benefits from its perceived quality and the link with HSBC. Also, its history means it has less of an NPL (non-performing loan) legacy than the Big Four.''

So it will be more a reflection of the woes of the mainland markets than the bank's prospects if the sale is abandoned.

Shanghai and Shenzhen were the world's worst-performing stock markets last year and have started this year flat. Eliminating the Shanghai part of the IPO will not hurt BoCom financially, one source said, since it is flush with cash and does not need the money to replenish its capital.

British lender HSBC paid HK$13.65 billion in August for a 19.9 percent stake in BoCom. Shortly after that, Beijing revealed three government agencies, including China's Social Security fund and Central Huijin, an arm of the State Administration of Foreign Exchange, had pumped 20 billion yuan (HK$18.86 billion) into BoCom.

Instead, a stock sale offers other "softer" benefits such as improved transparency and corporate governance, the source said. Cancellation would be a blow to Beijing-based Galaxy Securities, which had won the right to underwrite the US$1 billion offering of Shanghai A shares.

Analysts and sources said BoCom's Hong Kong stock sale will likely be priced at a minimum of two times book value, a premium to HSBC's stake purchase - the British lender bought its stake at 1.8 times book. Analysts said BoCom's book value at the end of 2004 was around US$9 billion, valuing the stock sale, assuming BoCom sells 15 percent of its equity at twice book value, at up to US$2.7 billion.

BoCom only applied formally for a Hong Kong listing on February 5, just a couple of days before local markets wound down for the Lunar New Year, so the bank is not expected to get the nod to proceed for some time yet.

"We are not expecting any official response [from Hong Kong Exchanges and Clearing] until early April," a source said. That would put the stock on target to start trading on the main board by late May at the earliest.

He also confirmed HSBC would maintain its 19.9 percent stake in BoCom by buying new shares during the stock offering.

HKEx tables procedural fix
Inundated stock exchange wants to streamline its policy-making apparatus
Denise Tsang
19 February 2005
South China Morning Post

Hong Kong Exchanges and Clearing wants to appoint at least eight investor representatives to a new policy-making panel as part of a major overhaul of the listing committee.

The proposal, included in a public consultation paper to be released on Monday, aims to streamline administrative procedures at a time when the exchange is receiving a prolific number of listing applications.

Herbert Hui Ho-ming, chairman of Hong Kong Institute of Directors, said: "It's timely to consider the listing committee's composition because of the changes to the market in the past few years."

The issue being studied is the replacement of the existing listing committee with five panels covering policy decisions, reviews, adjudication and disciplinary matters.

A highlight of the changes involves the listing policy panel, which will comprise up to 28 members, including a chairman and two deputies, HKEx chief executive Paul Chow Man-yiu and the eight or more investor representatives.

The panel will advise on and approve disciplinary measures, rule amendments and significant rule waivers and modifications.

Identifying significant first instance listing applications and making delisting decisions will be the principal tasks of the listing decision panel.

Members of this panel will be drawn from the listing policy panel, excluding its chairman and deputies.

Procedures for reviewing non-disciplinary matters will be simplified, with the review panel being the sole decision-making body. At present, many cases require two stages of review.

To simplify oversight, HKEx suggests that its board delegates certain decision-making powers to the listing division.

HKEx does not think this will result in conflicts of interest as the most important non-disciplinary decisions made by the decision panel will be reviewed by the review panel. And the policy panel will assume a central role in formulating and approving policy.

Lion plans to list mainland retail operation in HK
Parkson department store spin-off aims to raise US$100m for China expansion
Nichole Chan
19 February 2005
South China Morning Post

Malaysian conglomerate Lion Group plans to spin off its Parkson department store business in China on the Hong Kong stock exchange this year, in what would be the first overseas listing by a foreign-invested mainland retailer.

The offering, scheduled for the fourth quarter of this year, is expected to raise at least US$100 million, but the size could double depending on the number of department stores the company injects into the listing vehicle, market sources said yesterday.

Proceeds from the listing will be used to expand its retail business in the country. The Lion Group has selected BNP Paribas Peregrine as sole arranger of the share offering, and pre-listing due diligence has started, they said.

The investment bank declined to comment yesterday.

"Everything is still in the preliminary stage and the company has not decided what assets to inject," said one source.

"It might not list all of its department stores in China - perhaps 15 to 20 stores will be chosen. Some of the department stores are not wholly owned by the company."

Parkson is owned by Lion Group subsidiary Lion Diversified Holdings.

Parkson China is one of the 10 largest department store chains in the mainland.

The Lion Group's website says the company now owns or manages 40 Parkson department stores with a total floor space of more than six million square feet in major cities such as Beijing, Shanghai and Dalian. Several new stores are planned.

For the year ended June 30, 2003, Parkson China made a pretax profit of M$110 million ($225.77 million) compared with the M$9 million for its retail business in Malaysia, according to Malaysia's Edge Daily.

China retail and consumer plays have been favourites among institutional investors recently.

Several offerings from that sector, such as Dynasty Fine Wines Group, sportswear retailer Li Ning and Mengniu Dairy, have been heavily oversubscribed on bets that consumer spending in China will continue to soar.

The mainland's State Statistical Bureau defines the country's middle-class households as those with annual income of 60,000 to 500,000 yuan.

The bureau projects that by 2020, the middle class will increase to 45 per cent of total households from 5 per cent now.

Official statistics show that retail sales rose 13.3 per cent to 5.4 trillion yuan last year as per capita disposable income increased 7.7 per cent to 9,422 yuan per year.

Sales at the top 30 retail chains in China surged 32.9 per cent to 384.56 billion yuan last year.

Among the top 30 chains, department stores saw an 18.8 per cent increase in sales, compared with 46.5 per cent for specialty stores, 32.8 per cent for supermarkets and 49.7 per cent for convenience stores.

There are eight foreign retail chains in the top 30 - Carrefour China, Suoguo, Yums, TrustMart, Vanguard, Wal-Mart China, Lotus and Metro.

Monday February 21, 07:35 PM
China's Bank of Communications to split IPO between HK and Shanghai

BEIJING (AFP) - China's Bank of Communications will split its three billion dollar initial public offering (IPO) between Hong Kong and Shanghai after pressure from Chinese authorities to boost domestic stock markets, the Financial Times reports.

The move by the state-owned bank, China's fifth-largest lender, to raise up to 1.5 billion dollars in Shanghai in the first simultaneous Hong Kong and China IPO would represent a major test for China's market, the newspaper said.

China's stock markets were among the world's worst-performing last year and have suffered from questionable practices, lax regulation and the absence of a large fund management industry.

Lack of confidence in the markets has led many large state-owned companies to list in Hong Kong but Chinese regulators recently introduced a new system for pricing IPOs as well as new rules to improve corporate transparency and governance.

The Financial Times said people close to the deal denied reports that the bank would scrap its Chinese listing and that it had decided in principle to list eight percent of its expanded capital in Hong Kong and eight percent in Shanghai.

A further four percent would be sold to HSBC for about 750 million dollars, the newspaper said. This would allow HSBC to maintain its 19.9 percent stake in Bank of Communications, for which it paid 1.7 billion dollers last year.

According to the report, Bank of Communications is believed to have submitted its IPO application to both Hong Kong's stock exchange and the China Securities Regulatory Commission, the mainland's regulator.

The listing could happen in the second half of the year, it added.

China's Kunming Steel Set To Go Public In Hong Kong

BEIJING, Feb 21 Asia Pulse - Kunming Iron and Steel Co. Ltd is set to issue 580 million H shares on Hong Kong's main-board market on March 14 this year, with issue price ranging between HK$2.35-$2.69, to raise HK$1.265-$1.56 billion (US$162-$200 million) in capital.

Calculating based on issue price, the price-earning ratio of the company was only 3-fold or 4-fold in 2004 and 2005, and the net profit in 2004 is estimated to be no less than 1 billion yuan, up 58.5 per cent from the 631 million yuan in 2003.

Kunming Iron and Steel Co. Ltd was established on December 24, 2003, with a registered capital of 1.23 billion yuan. It mainly produces and sells pig iron, billet, medium and small sections, high-speed wire rods, HR ribbed reinforcing steel, CR sheet and coking products. Its products have been sold nationwide as well as been exported to Germany, Japan, Singapore, Indonesia, Viet Nam, and Thailand.

Fashion retailer targets $433m IPO to expand outlets
Grace Lam, Hong Kong Standard
February 22, 2005

Fashion retailer I.T, which is raising HK$433 million from an initial public offering in Hong Kong, said it will spend HK$280 million to expand its retail network in the territory and renovate existing stores.

The company, which carries hundreds of brands, including Tsumori Chisato and Helmut Lang, said it plans to add 23 new stores to its 129 outlets in the SAR in the coming year.

It will open new stores with a total floor area of up to 120,000 square feet in the three years from March 2005, group chairman and chief executive Sham Ka-wai said on Monday.

About HK$171 million will go towards opening multi-brand stores, while HK$49 million will be for the opening of single-brand stores and HK$60 million for renovation of existing outlets.

Sham, who is married to former actress Chingmy Yau, said he has no plans to sell his shares in the coming 12 months.

He said the company will strive to keep the rental expenditure at less than 20 percent of turnover and will continue to strengthen its foothold in Hong Kong while expanding in China.

"The recovery in Hong Kong's retail industry and the increase in spending power in greater China have created huge potential for our business," Sham said.

"We'll continue to seek network expansion.

"Our mission is to shape the fashion scene in greater China."

Meanwhile, the retailer also plans to add 30 stores to its 12 outlets in Taiwan and 60 to 80 stores in the mainland each year. It will use about HK$60 million of the net proceeds to fund the expansion in the two markets.

I.T, which set up a joint venture with listed apparel maker Glorious Sun Enterprises in 2003, now operates 23 concessions and sells apparel to 56 franchisee-owned freestanding stores and 10 franchisee-owned store-in-stores.

Sham said although the mainland operation was still in the red in 2004, he is confident it will become profitable "very soon.'

Thursday February 24, 04:08 AM

China's ASMC approved to launch Hong Kong IPO - report

BEIJING (AFX) - China's Advanced Semiconductor Manufacturing Corp (ASMC) has obtained approval from the China Securities Regulatory Commission to launch an initial public offering of up to 467.66 mln shares prior to a mainboard listing in Hong Kong, the Shanghai Securities News reported.

'The company will sell up to 425.15 mln new shares while its state shareholders will sell up to 42.51 mln existing shares,' the paper said, citing the securities regulator.
No further details were provided and no one from ASMC was immediately available for comment.

Earlier state media reports said that the Shanghai-based chipmaker is planning to list in the first quarter of 2005 and is hoping to raise between 100-150 mln usd.
ASMC, in which Royal Philips Electronics and Shanghai Belling own stakes, plans to use proceeds from the share offer to expand its Shanghai operations, the South China Morning Post reported earlier.

Bank of China International and Goldman Sachs were reportedly arranging the deal.

(1 usd = 8.3 yuan)

State-owned coal firm plans US$1b SAR listing
Hong Kong Standard staff reporter and Reuters
February 28, 2005

China National Coal Group is hiring banks to prepare a Hong Kong stock listing this year to raise about US$1 billion (HK$7.8 billion) to expand output as the mainland's coal shortage persists.

The firm invited a number of US and European investment banks, including Dutch bank ABN Amro, to pitch for a mandate in a so-called beauty parade last week to underwrite the initial public offering, a source said Sunday.

"It is in the process of hiring banks to run the IPO, which is likely to raise US$1 billion or more. It is not going to be launched in two days but the process will begin."

Officials at China National Coal, the country's number two coal producer, could not be reached for comment.

KGI Asia director Ben Kwong said coal mining is still a hot investment "as the market is bullish on mainland resources companies."

However, Kwong warned there will be uncertainties this year.

"Although we expect the stock market performance this year will not be worse than last year, uncertainties such as rising interest rates and overseas economic performance amid high oil prices and a weak US dollar may have an unexpected impact on the stock market and, in turn, the market response to the IPOs," he said.

"So the timing of listing is critical to the IPO candidates."

The listing will follow that of Shenhua Group, which is on track to launch a Hong Kong IPO in a few months' time to raise an estimated US$1.5 billion, taking advantage of high coal prices.

The share price of Yanzhou Coal Mining has risen more than tenfold in the SAR since 2000.

China's strong economic growth of around 9 percent a year, along with worsening rail congestion, has turned the once dirt-cheap fuel that makes up nearly 70 percent of its energy mix into the new "black gold."

Analysts say coal prices could remain strong for years as coal production is still struggling to keep up with demand.

State-owned China National Coal plans to double its annual coal production capacity to 100 million tons by 2007.

The company, which employs 97,000 people, had total assets of 41.5 billion yuan (HK$39.13 billion) at the end of 2003 and coal reserves of 11.9 billion tons, according to its Web site.

Coal demand in the mainland, the world's biggest coal producer, could rise by 6 percent this year to 2.1 billion tons, state media have quoted the China Coal Industry Association as saying.

Beijing says the coal shortage will be the biggest challenge this year for the world's fastest growing major economy.

Oil demand surged last year as most export companies bought diesel generators to avoid blackouts.

Taiwan plans new board to counter Hong Kong IPO challenge
February 28, 2005

Concerned that it is being bypassed as the overseas operations of Taiwanese companies raise funds, Taiwan plans to create a board on its stock exchange to lure international listings, including those by China-based Taiwanese firms.

The proposal, part of the government's efforts to develop Taipei as a regional financial hub, reflects fears that Hong Kong is continuing to widen its lead over Taiwan in regional finance.

The SAR is becoming an increasingly popular location for the initial public offerings of Taiwanese-invested companies in the mainland.

Several Taiwanese-linked companies operating in China have listed in the SAR in the past year, including China Metal International Holdings, Solomon Systech (International) and Mayer Holdings.

Earlier this month, Taiwan's Hon Hai Precision Industry, chose Hong Kong as the listing venue for its mobile phone spin-off, Foxconn International Holdings. This added to the pressure for Taiwanese authorities to do more to attract local listings.

In response, Taiwan's Financial Supervisory Commission, the island's top financial regulator, said it may set up a board on the Taiwan Stock Exchange for firms registered overseas to list their shares in Taiwan.

Commission chairman Kong Jaw-sheng said the goal was to promote Taiwan as a regional financial center where foreign companies - including offshore Taiwanese firms - could raise funds.

Initially, shares on the proposed board will likely be denominated in US dollars, and only foreign and Taiwanese institutional investors will be allowed to trade on the board.

"It seems the proposed offshore board is partly aimed at defending against China-based Taiwanese companies becoming more interested in listing their shares in Hong Kong," Polaris Finance Group investment banking division president CY Huang said. He said reaction to the idea of a new board has generally been favorable, but the proposal could be difficult to implement if the Taiwan government maintains restrictions on investment in the mainland.

In the mid-1990s, Taiwan instituted a "no haste, be patient" policy limiting the type and size of investments that Taiwanese can make in China. Investment in the mainland by firms registered in Taiwan is not allowed to exceed 40 per cent of their net asset value.

"It's not just an issue related to regulation of IPOs. The core issue is whether the government can provide a free and internationalized playground to attract investors," MasterLink Securities investment banker Curtis Han said.

The regulator is due to reveal details of the new board by June, but has said it will likely take one or two years before the plan can be implemented.

Aside from China policy, analysts cite several advantages that Hong Kong's stock market has over Taiwan. "Hong Kong is already an international financial center with high liquidity, transparency and sound supervision," Huang said.

"Also, Taiwanese companies are speedily expanding their China operations, which increases their demand for multinational investors and workers, including those from China. All of this makes Hong Kong a more attractive location."

According to Polaris Securities, Hong Kong was the world's third biggest IPO market last year.

Companies are also likely to gain higher valuations by listing in the SAR, which means they can raise more money in IPOs, analysts say.

At the end of December, the SAR's main board traded at a price-to-earnings ratio of 18.73, compared to 12.58 for the Weighted Price Index of the Taiwan Stock Exchange, Polaris said.

DOW JONES NEWSWIRES

Exchange operator's earnings jump 53pc
Vanson Soo, Hong Kong Standard
March 01, 2005

Hong Kong Exchanges & Clearing (HKEx), which manages Asia's second-biggest stock market, said 2004 full-year profit jumped 53 percent amid a surge in trading volume.

The exchange reported a profit of HK$1.06 billion, or HK$1 a share, compared with revised HK$692.7 million, or 66 cents per share, in 2003.

Income rose 19 percent to HK$2.39 billion last year, boosted by 25 percent growth, to HK$1.06 billion, in income generated from the cash market.

Chief executive Paul Chow attributes the strong results to the economic rebound and the return of positive market sentiment last year.

"There're lots of records made in both the cash and derivatives markets last year," Chow said.

Thanks to a flood of initial public offerings by mainland firms, the Hong Kong exchange broke its own record for funds raised last year and ranked third in the world in that category.

"The [strong] results continued in the months of January and February," Chow said.

Total turnover and average daily turnover on the main and second boards combined rose by 54 percent, to HK$3.974 trillion and HK$16 billion respectively.

The total number and average daily number of derivatives contracts traded on the Futures Exchange grew 36 percent to 14.02 million and 56,752, respectively.

The total and average number of stock options contracts traded posted an increase of 33 percent to 5.61 million and 22,720 respectively.

Investment income, however, plunged 23 percent to HK$228.6 million. Chow attributes the drop to lower interest rates, the special dividend for 2003 which was paid out in 2004, and smaller gains on foreign exchange.

The exchange generates its income from trading and settlement fees, initial and annual listing fees, depository, custody and nominee services fees, income from sale of information and investment income.

Return on equity, at 26 percent, was the highest in five years while the 48 percent cost-to-income ratio was the lowest over the same period.

The exchange operator also confirmed receipt of applications for simultaneous listings on A and H shares, though Chow declined to release details. Local media have recently speculated that Bank of Communications is among the applicants.

The exchange announced a 50 percent rise in total dividend per share, to 90 Hong Kong cents. No special dividend is declared for 2004.

March 2, 2005
Government Press Release
$126m earmarked for HKEx's IT facilities

The Hong Kong Exchanges Board has approved an IT capital budget of $126 million for 2005 with $46.3 million allocated to capacity upgrade and $26.2 million to replace obsolete hardware and software.

Secretary for Financial Services & the Treasury Frederick Ma told lawmakers today the move aims to ensure the organisation's IT infrastructure is well maintained for further growth and development of Hong Kong's financial market.

Mr Ma said Hong Kong Exchanges has proven track records in system reliability and availability.

According the Secondary Market Survey 2004, the exchange's trading and clearing participants indicated a high degree of satisfaction in respect of the efficiency and reliability of the systems that support stock market operations. The scores for all items achieved a mean of 5.50 on a 7-point scale.

Measures taken to maintain system's stability

Mr Ma said HK Exchanges has taken the following measures to uphold the highest standards of system integrity, availability and stability:

*all HKEx core mission critical systems are equipped with redundant architecture against any single point of equipment failure;

*fully equipped and secure backup data centres are in place to deal with potential site disaster situations; and

*regular disaster recovery drills are conducted according to well defined contingency plans and market communication procedures.

Mr Ma said HK Exchanges has made a strong resource commitment to ensure high quality IT service. In 2004, its recurrent IT spending was about $559 million, or 49% of the HK Exchanges operating budget.

Its IT Division employs 217 staff, 29% of its overall manpower.

The same level of operating budget and manpower strength will be maintained in 2005, Mr Ma said.

INTERVIEW: Red Chips On The Menu For Japanese Investors
By Carmen Chan
02 March 2005

HONG KONG (Dow Jones)--While asset sales of state-run companies will remain the main course for Japanese retail investors with an appetite for buying Chinese stocks, 2005 is likely to see increased demand for the initial public offerings of red chips or private-sector equities.

And of these issues, said David Dean, Nomura International (Hong Kong) Ltd.'s Head of Equity Capital Markets, mainland banks will likely be the "main theme" for Japanese investors buying into Chinese IPOs.

Japanese retail investors have access to overseas IPOs through a so-called public offering without listing, commonly known as POWL.

This allows overseas firms to offer their shares to Japanese retail investors without actually floating their stock in Japan as long as they are purchased through POWLs.

But the stock of POWLs is limited. Since 2002, there have only been 19, with around a half being Chinese offerings.

Dean said last year Japanese investors bought US1.15 billion worth of POWLs, the highest level in a decade, after US$715 million in 2003. He expects 2005's POWLs to exceed last year's figure but declined to project an amount.

Nine POWL's were offered in 2004; six were mainland Chinese IPOs and one from Singapore, Hong Kong and Europe.

Dean expects more than 10 POWLs to be launched this year, with China accounting as before for the bulk.

After a long absence, China POWLs resumed in 2002, with the listing of BOC Hong Kong (Holdings) Ltd. (2388.HK), the Hong Kong arm of China's biggest bank.

Nomura has arranged eight of the 19 POWLs since BOC HK. Together, those POWLs raised US$2.7 billion.

"The China concept is a favorite in Japan as investors focus on China's fast-growing economy," said Dean.

"Traditionally Japanese retail investors have bought into the big privatizations, but last year they started to look at the private sector," he said.

Chip foundry Semiconductor Manufacturing International Corp.'s (SMC) was the first Chinese private company to launch a POWL. The retail demand in Japan was overwhelming, with the company getting orders totaling US$1.6 billion, almost the same size as the global IPO raised. The final allocation of Japanese retail investors was just US$109 million.

Dean believes Chinese banking IPOs will form the bulk of POWLs offered in 2005.

As matters stand, three Chinese banks are being readied for IPOs in Hong Kong this year - the first time that mainland banks have been able to float overseas.

Bank of Communications, the country's fifth biggest lender, is slated to hold its IPO in the first half of 2005, followed by Minsheng Banking Corp. (600016.SH), China's first privately owned bank, and then China Construction Bank.

Other than banks, China's largest coal producer, Shenhua Group, is planning an IPO in Hong Kong in the first half of 2005, with the stock expected to sell to Japanese retail investors as a POWL.

Dean said the POWL market got off to a strong start this year with German development bank Kreditanstalt fuer Wiederaufbau's (KFW.YY) EUR1.1 billion bond placement in Japan. The bonds were exchangeable with shares of Deutsche Post AG (DPW.XE), with the issue forming part of the privatization of the German mail and logistics firm.

"KfW's exchangeable bond placed in Japan was the first time that a privatization offering has been completed entirely outside the issuer's home market," said Dean.

The offering was also notable as it was the first time in several years that an issuer targeted a specific Japanese tranche rather than folding the POWL into a large scale global offering. "The issue exceeded all expectations - another example of strong Japanese liquidity," said Dean.

He believes further targeted POWL deals will happen given the success of the KfW deal.

Dean said Indian companies - and especially software firms - are looking at selling their shares to Japanese retail investors through the POWL system.

While he declined to name any specific deals in the pipeline, many in the market expect Indian software major Infosys Technologies Ltd. (500209.BY) to be India's first POWL.

Cosco shakes up for H-share listing
Restructuring has the potential to attract investors shy about pure shipping stocks
Russell Barling
12 March 2005
South China Morning Post

China Ocean Shipping Group (Cosco) yesterday took a giant step closer to listing its container transport arm in Hong Kong, potentially doubling the revenue potential of the initial public offering expected within three months.

The state-owned group revealed that it had registered Cosco Holdings on the mainland and on Monday formally asked the stock exchange for permission for the new firm to be traded as an H share. No start date was set.

The group would inject its 52.99 per cent stake in blue chip Cosco Pacific into Cosco Holdings along with its "entire interests in its container shipping and related businesses", Cosco Pacific managing director Sun Jiakang said in a statement to the exchange yesterday.

The injection of Cosco Pacific into what was expected to be a pure shipping play had increased the offering's revenue potential from US$2 billion to US$3 billion, market sources said.

The listing had been expected to generate marginally more than the US$985 million mainland rival China Shipping Container Lines raised in its public offering in June last year.

The addition of the Cosco Pacific stake has the potential to attract investors who would otherwise have shied away from the volatility of pure shipping stocks.

"It appears to be a very clever restructuring," said a transport analyst from a western investment bank. "It is likely to lead to a substantially larger transaction given that the earnings quality is a lot less cyclical."

The combination of shipping and terminal operations under one listed firm is not unprecedented in Asia; Orient Overseas (International) and Taiwan's Evergreen Group both offer the operational partnership, albeit not with such potential for balanced earnings.

The injection of Cosco Pacific into the new listing also raises the possibility that Cosco Container Lines (Coscon) would be able to partly fund its aggressive fleet expansion through Cosco Pacific's generous dividend policy: the firm's payout ratio was 56.5 per cent this year.

"Coscon's plans are to bring its container fleet up to 800,000 teu (20-foot equivalent unit) slots towards 2010, although conservative estimates put the forward fleet closer to 600,000 teu," Citigroup analyst Charles DeTrenck said in a report published on January 31. However, the forecasting services have Coscon rising towards "only" 500,000 teu by 2008-2009.

"Current capital expenditure on Coscon's core vessels could be US$3 billion. But if Coscon does increase its fleet towards 800,000 teu, total vessel spending could rise to US$7 billion [including on and off balance sheet], or over US$1 billion per year until 2010," he said.

The listing partnership also could offer the potential of greater savings through operational compatibility. For example, Coscon often leverages its sibling relationship with Cosco Pacific, which also leases containers, to lessen its equipment cost burden - to the detriment of the blue chip's earnings potential.

With them under the same corporate umbrella, any loss for Cosco Pacific would be compensated by a gain for Coscon.

"At this early stage the only potential drawback that comes to mind is that some investors may pull out of Cosco Pacific in favour of Cosco Holdings," the analyst said.

However, punters appeared to take the news positively yesterday. Shares in Cosco Pacific rose 2.35 per cent to $17.40.

Top Chinese container line COSCO sails for HK IPO
By Alison Leung

HONG KONG, March 11 (Reuters) - China's top shipping group, China Ocean Shipping (Group) Co. (COSCO), plans to float its container shipping arm, the world's seventh largest, in a Hong Kong IPO that is expected to raise more than $1 billion.

Hong Kong-listed COSCO Pacific Ltd., which leases shipping containers and operates terminals, said on Friday that sister firm China COSCO Holdings Co. Ltd. had submitted paperwork to the stock exchange to list its H-shares.

The shipping sector is booming worldwide thanks to China's surging economy. Many experts expect freight rates and volumes to hit fresh highs this year, but some question how much longer the momentum can last and worry about a flood of new capacity poised to enter the market.

"We think the container shipping industry has already passed its peak in the current cycle," ABN AMRO analyst Osbert Tang wrote in a research note on rival shipper Orient Overseas (International) Ltd.

COSCO Holdings will hold state-run COSCO Group's interests in container shipping and related businesses and will become the direct parent of COSCO Pacific.

But COSCO Pacific's listing position and its businesses will remain unchanged, the statement said.

Analysts said including a controlling stake in COSCO Pacific in the newly formed company will help the listing vehicle offset some of the cyclical risk inherent to shipping lines.

"COSCO Pacific is trading at around 16 times P/E while container shipping firms are only around 4 times," said Michael Chan, an analyst at BOC International.

The company gave no financial details of the proposed listing. A source familiar with the situation said the deal should be worth more than $1 billion.

Shares in COSCO Pacific have jumped 52.4 percent over the past year, giving it a market value of US$4.87 billion. Its shares ended 2.35 percent higher on Friday.

COSCO Group operated 123 container ships with total capacity of more than 300,000 20-foot-equivalent units (TEU) at the end of 2004, analysts said.

In January, it ordered four 10,000 TEU container ships, the largest in the world, from South Korea's Hyundai Heavy Industries Co.

HSBC and UBS are underwriting the deal. (Additional reporting by Daisy Ku in Beijing).

Dalian bank plans $2.8b IPO
Ben Blanchard, Hong Kong Standard
March 14, 2005

Second-tier Chinese lender Dalian City Commercial Bank is aiming to raise about HK$2.8 billion in a Hong Kong listing next year and is talking to potential foreign investors, a senior executive said.

About 20 foreign banks were in negotiations with privately held Dalian City Commercial, vice president Xu Wen said on the sidelines of a banking award ceremony in Beijing on Saturday. Dalian City Commercial is one of China's more than 100 city commercial banks, which the government has encouraged to seek foreign investors and listings.

Premier Wen Jiabao reiterated in an annual report to parliament that China would accelerate reforms of state commercial banks, which account for the bulk of the financial system's bad debt of more than US$200 billion.

Regional commercial lenders typically have little bad debt.

"Our plan is to list overseas, in Hong Kong, in 2006," Xu said. "We're preparing to raise around three billion yuan." The bank was now readying its listing application, he said, declining to give further details.

The bank, based in the northern port city of Dalian, joins a long list of mainland lenders waiting to raise funds at home and abroad, including Minsheng Banking, Bank of Communications, Bank of China and China Construction Bank. China has been trying to shore up its banking system to cope with greater foreign competition as the market prepares to open fully at the end of 2006.

Part of the government's strategy is to let the banks bring in strategic overseas investors and their badly needed management expertise and risk-control skills.

"We're having preliminary talks with about 20 overseas banks" as potential investors, Xu said. "The banking regulator hopes we can attract investment from European or US banks."

The government permits any one foreign investor to own up 20 percent of a domestic bank's shares. The combined foreign investment in a bank is capped at 25 percent.

Dalian City Commercial Bank, set up in 1998, is controlled by a private Dalian-based diversified industrial conglomerate, the Shide Group, according to that firm's Web site. Foreign investors, keen to get access to the country's US$1.5 trillion in savings, can buy more control for less money by taking stakes in smaller banks, so those lenders are attracting outsized attention.

Several overseas banks have already bought into smaller Chinese lenders.

Hang Seng Bank last year bought almost 16 percent of Industrial Bank for about US$200 million.

REUTERS

Graft investigation clouds Construction Bank plans to list in SAR
Hong Kong Standard staff reporter and agencies
March 16, 2005

China Construction Bank's plan to sell shares for the first time in Hong Kong may be delayed as its chairman Zhang Enzhao is allegedly being investigated for corruption and may be removed, analysts said.

Zhang is under investigation, sources close to the bank said Tuesday, just months from an expected initial public offering in the third quarter.

"This will have a negative impact, especially given his role - he's so senior," said Barclays Capital analyst Arthur Lau. "It won't derail the whole share sale, but it may delay it.

"Investors will again bring up the old questions about corporate governance among Chinese banks."

Zhang, who was born in 1947, replaced Wang Xuebing, who was fired as head of China Construction Bank in 2002 because of a probe into loans made between 1994 and 2000, when he was president of Bank of China.

A Beijing court later sentenced Wang to 12 years in prison for taking bribes, said Xinhua News Agency.

"[Zhang] is now under investigation." one senior industry source said.

"His activities have been limited as he is under surveillance."

China Construction Bank, the country's third-largest lender, is expected to seek US$5 billion (HK$39 billion) to US$10 billion in its initial public offering.

Citigroup, one of the underwriters of the offer, didn't return calls. Another, Morgan Stanley, declined to comment.

Core Pacific-Yamaichi analyst Bonnie Lai said any scandal or rumor may stall the progress of China Construction Bank's IPO.

"It's safer [for the bank] to clean out all the scandals before it gets listed," she said.

A spokesman at China Banking Regulatory Commission declined comment and two bank employees in Zhang's office said they were unaware of the reported corruption case.

"Chairman Zhang is still working as usual," one employee said. "He worked yesterday and will certainly come today."

A People's Bank of China spokesman said the central bank could not comment on the issue since it has not yet received formal notification from authorities on the issue, a spokesman said.

HKEx seeks extra auditor disclosure
Change backed by accountants would force detailed reasons for change of reviewer for listed firms
Enoch Yiu
17 March 2005
South China Morning Post

Hong Kong Exchanges and Clearing and the accountant regulator want to force listed companies and accountants to give detailed reasons for any change of auditors.

Proposals for more disclosure, to be released in a public consultation paper on Monday by the Hong Kong Institute of Certified Public Accountants (HKICPA), are a response to switches of auditors last year without clear explanation.

"The listed companies announced only that they could not reach an agreement with their auditor over the auditing fee," said Winnie Cheung Chee-won, chief executive of HKICPA.

"This is not good enough. There are many reasons to demand a higher fee, including higher risks for the auditors, a lack of internal controls in the companies, or transactions needing a lot of audit work. This information is not disclosed to investors at the moment."

After discussion with the HKEx and the Securities and Futures Commission, the accountants institute proposes a new ethics standard for auditors of listed companies.

Under that standard, when an auditor resigned he or she would need to issue a letter explaining the reasons to the board of directors and audit committee of the listed company.

The company would then have to publicly announce those reasons.

"If the auditor felt the company announcement was inaccurate," said Ms Cheung, "he or she could pass the original resignation letter on to the SFC for enforcement action."

HKEx chief executive Paul Chow Man-yiu said the exchange supported the HKICPA proposals.

"The increased disclosure would help protect investors," he added. Mr Chow also said the exchange board meeting yesterday supported the government proposal to add statutory backing to the listing rules and to give the SFC power to impose fines.

"For the commission to carry out its duty, it is necessary for it to have fining power," he said.

But an HKEx source said that the board wanted that power to be limited.

"The government's proposed $5 million cap may be too high," the source said, without specifying what cap the board wants.

Under the government proposal, the SFC would replace the exchange as enforcer of rules concerning disclosure and connected transactions.

The government also proposes that the SFC refers serious cases to the Market Misconduct Tribunal (MMT) for civil sanction or a maximum fine of $8 million, or to the Secretary of Justice for cases deemed criminal.

The SFC last week said it wanted to be able to impose fines of up to $10 million and unlimited fines for the MMT.

The HKEx source also said the board would like to keep some regulatory control: "The HKEx is a frontline regulator for listed companies. Statutory backing of some listing rules should not lead to diminishing its power."

The exchange source said the board also approved a range of fee cuts yesterday worth $48 million a year on clearing and settlements for investors.

Shanghai Elec to start marketing US$700 mln HK IPO next wk

HONG KONG, March 18 (Reuters) - Shanghai Electric Group Co. Ltd., China's largest mechanical and electrical equipment manufacturing firm, will start marketing a US$500-$700 million Hong Kong IPO next week, a source close to the deal said on Friday.

The firm designs and produces equipment ranging from power generation, power transmission and distribution to electromechanical integration and environmental protection.

CSFB, which is handling the initial public offering, declined comment.

Green crackdown stalls Guodian IPO
Carol Chan and Lee Yuk-kei, Hong Kong Standard
March 21, 2005

China Guodian (Group), one of the mainland's big five state-owned power producers, will delay its US$500 million (HK$3.9 billion) initial public offering in Hong Kong following a crackdown by the country's environmental watchdog, people familiar with the deal said.

"IPO preparation work has been put on hold. There is no timetable for the listing, though plans to list in Hong Kong do not change,'' he said, adding: "It will definitely launch the IPO.''

Guodian had planned to list at the end of last year or the beginning of this year. It appointed Morgan Stanley and China International Capital Corp as its sponsor and underwriter.

It is the last of the five state-owned leading power generators to seek a listing in Hong Kong. The other four, Huaneng Power International, Datang International Power Generation, Huadian Power International and China Power International, drew a flood of investors.

China's State Environmental Protection Administration, the mainland's top environmental watchdog, ordered an immediate halt to 30 big power plant construction projects in mid-January. Among those halted were two owned by Guodian that had been placed on a blacklist. The administration also ordered 46 power plants to install desulfurization units.

The 30 power projects were halted because they failed the environmental impact assessments.

Municipal governments in some provinces, particularly those hit by power shortages, pushed ahead with the plants despite the assessments.

"Environmental problems in the China power industry have been reconciled under the table,'' said an industry source. "As no return would be seen on environmentally related expenditures, many firms prefer paying fines or bribery to investing in environmental protection equipment.''

For example, waste treatment at two 600,000-kilowatt plants costs five million yuan (HK$4.7 million) a year, while the government fine is just 500,000 yuan, the source said.

``One of the projects halted in Yunnan belongs to Guodian's A-share listed vehicle on Shanghai Stock Exchange, GP Power Development. That A-share company is the main asset for Guodian's IPO plan,'' sources said.

In addition, Guodian also faces problems regarding the resettlement compensation for residents displaced by hydropower projects, the source said.

Analysts say it is not a good time to persuade investors to invest in power companies because soaring coal prices are squeezing profitability even though electricity demand is high.

Huaneng Power, which is listed in Hong Kong and Shanghai, recorded its first drop - 2 percent - in full-year profit since its 1994 listing because of increased fuel costs.

Guodian was set up in December 2002. The company, which had 36.57 million kilowatts of capacity at the end of 2003, had 75.3 billion yuan of assets and 53.7 billion yuan of debt.

Guodian plans to build capacity of four million kilowatts on average per year, boosting total capacity to more than 40 million kilowatts this year, according to its Web site.

The listing delay will not cause immediate financial distress to Guodian, people familiar with the deal said.

Shenhua in talks with tycoons on US$3b float
Carol Chan, Hong Kong Standard
March 23, 2005

Taking a page from the successful sale of shares in China Life in 2003, mainland coal giant Shenhua Group is lining up strategic investors and Hong Kong tycoons to back its planned US$3 billion (HK$23.4 billion) share sale in Hong Kong and Shanghai later his year.

While stressing that "the negotiation between potential strategic investors are still proceeding and no agreements have been signed yet,'' sources said the buyers, who would commit in advance to purchase shares in the initial public offering, will be major well-respected firms.

The sources declined to identify any of the companies with which talks are being held.

Analysts believe top electric power generators, such as China Huaneng Group, the mainland's biggest, and CLP Holdings, the larger of Hong Kong's two electricity providers, may be among the potential buyers.

Shenhua is a leading supplier of coal to Huaneng Group, with which it is involved in a joint venture along with CITIC Pacific, the prominent red-chip conglomerate, and North United Power Corporation of Inner Mongolia.

Shenhua also has a mainland joint venture with CLP Holdings, CLP Guohua Power Company Limited, which operates four power stations.

Timing of a share sale hasn't been determined since "the stock exchange listing committee hasn't fixed a hearing date," a source said, adding that "we hope it would be arranged in the next month, so we can kick off the marketing."

Shenhua is likely to become the first mainland firm to sell shares simultaneously in Hong Kong and Shanghai, getting a jump on the mainland's fifth-largest lender, Bank of Communications, which has said it plans a dual listing for later this year.

"Hopefully this year, the first company will be able to simultaneously list its H shares in Hong Kong and A shares on the mainland," said Paul Chow, chief executive of Hong Kong Exchanges and Clearing, this week without providing any details.

Shenhua, the country's biggest coal mining group, may raise more than US$3 billion, sources said, making it the third-largest IPO of a mainland state-owned company. It will only trail China Unicom, the smaller of the mainland's two mobile operators, which raised US$5.65 billion in June 2000, and China Life Insurance, the mainland's largest insurer, which raised US$3.45 billion in December 2003.

The new shares, which will trade in Hong Kong and Shanghai, might represent as much as 30 percent of the equity in Shenhua. The proceeds will be used to expand the capacity of its existing coal mines, ports and power plants, as well as build new ones, according to sources. The IPO is being arranged by China International Capital Corporation, Deutsche Bank and Merrill Lynch.

Shenhua completed an asset reshuffle and set up a shareholding company, China Shenhua Energy, as its listing vehicle at the end of last year. The new company includes most of Shenhua's core assets, including 13 subsidiaries that are involved in coal, power, railways and ports. It boasts assets of more than 90 billion yuan (HK$84.83 billion) and liabilities exceeding 60 billion yuan. The assets do not include its 60 billion yuan coal liquification project in Inner Mongolia, which will produce synthetic crude oil from coal, and which is not expected to be a moneyspinner because of the large capital investment.

More mainland coal producers are expected to tap the Hong Kong market to bolster their balance sheets as Beijing goes ahead with plans to create six to eight large coal groups, each with a production capacity of more than 100 million tons per year, in a bid to improve management and raise safety standards.

China National Coal Group, the country's second-biggest producer, also plans to sell shares by the end of this year. It has picked CICC, Citigroup and Morgan Stanley to arrange its US$1 billion overseas IPO.

Heilongjiang Longmei Mining (Group), formed in December through the merger of four large coal mines in Heilongjiang, has named CITIC Capital as its financial adviser, and is also considering an overseas share sale, sources said.

HKEx slams duplication in tougher listing rules
SFC says statutory backing to impose heavy fines will save legal costs and be in line with international standards
Kelvin Wong
25 March 2005
South China Morning Post

Hong Kong Exchanges and Clearing yesterday hit out at several points made in the conclusion paper of a government consultation to enhance the regulatory regime governing new listings.

In a 14-page response, the exchange said that while it supported giving the Securities and Futures Commission additional enforcement powers for key listing regulations, some of the proposed changes would result in "significant administrative and enforcement duplication" between the two regulatory bodies.

"HKEx submitted that statutory backing should not result in two regulatory bodies administering very similar and in many cases identical sets of requirements," the exchange said.

The HKEx document cited purview over disclosures for changes in directors and auditors as examples. The exchange also voiced concern about fines the SFC and the Market Misconduct Tribunal - a new civil court mandated by the Securities and Futures Ordinance to handle the most serious cases - would be entitled to levy on firms breaching listing rules.

It maintained that while no limits should be set on the tribunal's ability to fine wrongdoers, the government should consider lowering the proposed $5 million maximum fine imposable by the SFC.

Earlier in the day, SFC chairman Andrew Sheng reiterated the commission's stance, saying it favoured a $10 million maximum fine. Allowing the SFC to impose heavy fines for breaches of listing rules would improve enforcement and help Hong Kong to operate at international standards, he said.

"If you look at regulators in countries like the United States and the United Kingdom, their ability to levy hundreds of millions of fines on companies have helped to save legal costs and speed up legal proceedings," Mr Sheng said.

He said that under the proposed system, more serious breaches, such as theft of clients' funds, would still be referred to the Commercial Crime Bureau and the Independent Commission Against Corruption.

Mr Sheng also tried to dismiss suggestions that there would be a double standard in the SFC's handling of listing rule breaches.

"When you decide the level of fines, you have to look at a company's financial capability and the damage it has done to the market," Mr Sheng said.

"That is why we have to decide on a case-by-case basis. The decisions will not be random and a company will not escape more serious punishment just because it is able to pay a certain amount of fines. Proportionality is key."

Meanwhile, the SFC revealed that the International Organisation of Securities Commissions was hoping to use next month's annual conference in Colombo, Sri Lanka, to convince more Asian regulators to sign an international memorandum calling for co-operative cross-border capital market rules.

Mr Sheng, who also chairs the technical committee of the 173-member organisation, said a memorandum would help facilitate an information exchange between regulators in different markets on policy and prosecution matters.

"While regulators in the US, France, Britain and [here] have all signed the agreement, many Asian countries such as the mainland, Japan, South Korea and Singapore still have not," he said.

REIT faces year setback
Dennis Ng, Hong Kong Standard
March 25, 2005

Legal aid victory means little chance of $32b listing in 2005

The Link Real Estate Investment Trust may be dead for the year after a ruling awarding legal aid to public housing tenant Lo Siu-lan cleared the way for her to make a final appeal in her attempt to sink the deal.

Anticipating that the appeal will move forward, Housing Authority officials said there is very little chance the HK$32 billion listing will push through this year.

It will take at least three months to put the deal back together, they said. With an appeal now almost certain, deputy director of housing Kenneth Mak said the chance of the Link REIT listing by the middle of 2005 is small.

Assistant director of housing Lam Lit-kwan, who is responsible for privatization, said getting the deal to market now depends on the court's timetable. She is "not optimistic'' it will happen this year.

District council member Andrew To, who helped Lo lodge her judicial review last December seeking to block the Housing Authority from selling the assets on which the Link REIT trust is based, said: ``The decision means we have legal grounds to bring the case to the Court of Final Appeal.

"This overturned the decision made by the Legal Aid Department, which believed the case did not have merit."

Lo had been waiting for legal aid to be awarded before filing her final appeal, To said. Now the case will go into its next phase. "We are certain Lo will make the appeal," he said.

The derailing of the Link REIT public offering last December came despite Lo losing the first two rounds of the legal battle because underwriters could not face the uncertainty posed by the final appeal process.

Efforts by the government to speed up the appeals process were rebuffed by the court last year, leaving the widely anticipated offering in limbo and the government with another embarrassing failure on its hands.

A three-member legal aid committee of review chaired by High Court registrar Christopher Chan ordered the Legal Aid Department to provide assistance to Lo for her application to the Court of Final Appeal within seven days after the Easter Holiday.

Lo began her legal action last December to stop the listing of the Link REIT on the grounds that it will be harmful to the interests of public housing tenants.

The planned listing came off the table less than 24 hours before trading was to begin on December 20.

On January 3, Lo applied for legal aid, but the Legal Aid Department turned her down.

Lo appealed that decision, and the Court of Final Appeal agreed to extend the deadline for an appeal for seven days after its judgment.

The Housing Authority had hoped to spin off its retail shopping malls and car parks under the Link REIT by mid-2005 following the December debacle.

Officials Thursday offered no timetable for the listing in light of Lo's appeal.

Lam said Housing Authority staff are inspecting the properties for a possible re-appraisal once the listing is cleared to proceed.

If Lo takes the case to the Court of Final Appeal, Lam noted, both sides would have 35 days to submit documents to the judges, and then another 40 days to submit additional information to the court before the hearing.

Lam said the court has a busy calendar of cases and she is worried that the Link REIT appeal will be postponed due to other matters.

She said a possible judicial review against the government's amendment of the Chief Executive Election Ordinance, for example, may take precedence over Lo's case.

The Housing Authority had expected to reap billions of dollars from the listing for the next financial year, but its forecasts have now been thrown into disarray.

Mak said the other issue now facing the authority is the outcome of a suit by public housing tenants demanding rent cuts. The tenants won their case in the Court of First Instance, but lost in the Court of Appeal. The case is now pending a hearing at the Court of Final Appeal. He said the authority's financial position would be fine if the court did not order it to cut domestic rents, even if it could not spin off the shopping malls and car parks.

The Link REIT is costing the authority about HK$12 million a month, including about HK$10 million in staff costs.

Minsheng Gets Approval for $880 Mln Hong Kong Sale

March 25 (Bloomberg) -- China Minsheng Banking Corp., the nation's first privately owned bank, won approval from regulators to sell stock in Hong Kong, enabling it to raise about $880 million to fund increased lending as competition intensifies.

The China Securities Regulatory Commission approved a sale of 1.3 billion shares, or one fifth of its outstanding stock, Minsheng said in a statement to the Shanghai stock exchange today.

"It may take as little as three months for Minsheng to list in Hong Kong, now this hurdle has been cleared," said Wang Jinxu, who arranges share sales at Everbright Securities Co. in Shanghai. "Market conditions may also determine the timing."

Minsheng, which has less than a tenth of the assets of China's biggest state-owned bank, also needs funds to compete with Citigroup Inc., HSBC Holdings Plc, and other overseas lenders that will gain unrestricted access to the nation at the end of next year. It is vying with state-owned rivals such as Bank of Communications and Bank of China to be the first lender to sell shares overseas in a mainland banking business.

Minsheng is the first Chinese lender seeking to sell shares overseas that has won approval from the regulator. The Beijing- based bank, which still needs approval from the Hong Kong stock exchange, aims to complete the sale within six months, Vice Chairman and co-founder Liu Yonghao said on March 3.

Selling shares in Hong Kong will enable Minsheng to fund increased lending and keep its capital higher than the minimum demanded by banking regulators. The lender had capital equal to 8.59 percent of its assets at the end of 2004, higher than the 8 percent regulatory minimum.

Bad Loans

Shares of Minsheng gained 2.8 percent this year, compared with a 4.8 percent decline in the benchmark Shanghai composite index. The stock had dropped 0.01 yuan to 5.59 yuan (67.5 U.S. cents) at 11:04 a.m. local time.

Minsheng was founded in 1996 by pig-feed tycoon Liu and other investors to provide loans to private companies that had difficulty getting credit from state banks. The bank last month reported a 47 percent jump in net income for 2004 to 2.04 billion yuan. Its bad-loan ratio was 1.31 percent at the end of 2004, compared with an average of 15.6 percent for China's four-biggest state-owned banks.

"Minsheng is likely to list ahead of Bank of Communications and that will give it an advantage in pricing, given its relatively small size," said Tang Chuan, an analyst at KGI Securities Co. in Shanghai.

Bank of Communications

Total assets at Minsheng were 445.4 billion yuan at the end of last year, less than half of Bank of Communications' 1.08 trillion yuan at the end of September. The Shanghai-based lender, which is one-fifth owned by HSBC, may raise $2 billion in an initial public offering in China and Hong Kong, people familiar with the plan said in September.

Industrial & Commercial Bank of China, the nation's biggest lender, has total assets of $640 billion.

Minsheng sought shareholder approval in December to extend the deadline for the proposed Hong Kong share sale by a year to Jan. 8, 2006, after failing to gain regulatory approval in 2004.

Preparations for the Hong Kong share sale were disrupted after the bank said in February last year that it faked a document showing that a shareholder meeting approved a change in the company's name.

Temasek Stake

Temasek Holdings Pte, a $54 billion Singapore government fund, in January bought a 4.55 percent stake in Minsheng. San Francisco-based Newbridge Capital Ltd. earlier dropped plans to buy the stake after agreeing to acquire 18 percent of Shenzhen Development Bank Co.

Total lending at Minsheng jumped 43 percent to 288.4 billion yuan last year, compared with a 38 percent increase in deposits to 380 billion yuan. The pace of loan expansion may cause concern to some investors, according to KGI Securities' Tang.

"It's known for being fast-expanding but risky," said Tang. "Minsheng's reputation was a bit tarnished by the document forgery incident last year."

Bad loans won't rise to more than 2 percent of total lending this year, Minsheng said in its earnings announcement last month.

Yunnan Copper plans $1b share sale
Carol Chan, Hong Kong Standard
March 29,2005

Yunnan Copper Industry (Group), China's third-largest copper producer, intends to sell shares worth at least one billion yuan (HK$942.9 million) in Hong Kong to finance its expansion.

The sale could come by year's end "if everything works smoothly,'' Zou Shao Lu, president and general manager of Yunnan Copper, told The Standard in a telephone interview.

"We have named China Everbright Capital as sponsor,'' he said, and other advisers are already at work.

China Everbright was sponsor of Zijin Mining, the mainland's leading gold producer, during its initial public offering in 2003.

Yunnan Copper will form a new unit to sell to investors. This will include its 64.84 percent stake in its Shenzhen-listed arm, Yunnan Copper Industry Co, which focuses on smelting and processing, and the company's copper ore reserves, sources close to the deal said. Its reserves are about half the size of those owned by the country's biggest producer, Jiangxi Copper.

"The restructuring plan has already been submitted to the mainland regulatory bodies,'' a source said.

A growing number of mainland metals and mining firms hope to sell shares overseas in order to raise capital to fund expansion and acquire more advanced technology. "Yunnan Metallurgical is also preparing their overseas listing,'' the source said.

Strong copper prices helped Yunnan Copper Industry Co more than double its net profit last year under mainland accounting standards, outpacing a 76 percent climb in revenues, as margins climbed across the board. It earned 239 million yuan last year on sales of 7.2 billion yuan, as prices of the London Metal Exchange's benchmark copper futures surged 35 percent.

Zou said the group plans to increase copper cathode output, its core business, to around 350,000 tonnes this year, up from 220,000 tonnes in 2004, rising to 500,000 tonnes by 2010. It aims to increase its copper reserves to 10 million tonnes by 2010, which could involve capital spending of more than three billion yuan, according to state media.

Jiangxi Copper had proven ore reserves of 8.2 million tonnes of copper as of the end of 2003, approximately one-third of the mainland's reserves.

There are still potential hurdles to Yunnan Copper's plans. According to mainland media reports, Chinalco, parent of Aluminum Corporation of China (Chalco), the country's biggest aluminum producer, is in talks to buy a stake in Yunnan Copper Industry Co for more than one billion yuan.

A State-owned Assets Supervision and Administration Commission official said "they are still talking, but nothing has been decided so far.''

Zou, who is also chairman of Yunnan Copper Industry Co, said he has heard nothing from Chinalco about any buyout, though he said "it is hard to say whether the Yunnan government, the sole shareholder of the group, has [held such talks] with Chinalco.''

UPDATE 1-Hong Kong to allow REITs to invest overseas
By Daisy Ku and Tony Munroe

HONG KONG, March 30 (Reuters) - Hong Kong, which is looking to jump-start a market for property trusts, said on Wednesday it will allow locally listed real estate investment trusts (REITs) to invest overseas -- including fast-growing mainland China.

The proposed rule change, slated to take effect in June, would make REITs a more attractive investment vehicle both for property owners and investors eager to put their money in office and retail space that is mushrooming across China.

Some analysts have said China's REIT market could be as big as Japan's US$16 billion REIT sector in five years. A prohibition on investing overseas is among the factors that have stymied the development of the REIT sector in Hong Kong.

"It's an important development," said Danny Palmer, global head of equity and equity linked capital markets at HSBC, one of three banks underwriting the US$3 billion Link REIT flotation in Hong Kong that has been stalled by a legal challenge.

"Once these things get going, you'll see in Hong Kong a mixture of Hong Kong and China vehicles," he said.

REITs pay most of their rental income as dividends. Investors like them because they can generate steady yields, while landlords use them to free up capital to invest in new projects.

Alexa Lam, executive director of intermediaries and investment products at Hong Kong's Securities and Futures Commission (SFC), told a news conference that would-be REIT operators interested in holding overseas properties have been in touch with the regulator.

"We believe this is the right time to lift the geographic restriction," she said.

NATURAL MARKET

Seen as more stable than traditional property stocks, REITs are gaining popularity in Asia, with Singapore especially active.

Hong Kong, where property investing is a hobby and numerous real-estate firms are listed, is keen for a piece of the action.

"If you look at some of the foreign companies that are going into China and establishing nationwide franchises, its a natural market for the real estate on those franchises to be financed," Palmer said in an interview.

"If you had a nationwide chain of shops, for example, the natural thing to do would be to finance those premises and land through a REIT and leave the management with the international company," he said. "If you look at the U.S. market, that's how a lot of these things are financed."

Companies that have expressed interest in Hong Kong REITs include Beijing-controlled China Resources Holdings, the parent of Hong Kong-listed China Resources Enterprise Ltd. , and developer Great Eagle Holdings , which owns hotels across Asia.

Last year, the Hong Kong Housing Authority planned an IPO of its Link REIT, which would be the first locally listed REIT and the world's biggest listing by a property trust. The sale of shopping centres and car parks was put on hold, however, in the face of a legal objection by an elderly public-housing tenant.

Li Ka-shing, who is Hong Kong's richest man, did not wait for a Hong Kong REIT market to develop and listed his Fortune REIT in Singapore in 2003. A Fortune REIT executive recently said the group would seek a listing in Hong Kong this year.

Late last year, Singapore's Suntec Real Estate Investment Trust , based on a shopping mall and apartment complex partly owned by Li, raised US$505 million in an IPO.

In November, Hong Kong's SFC changed its rules to allow fund management firms to invest in local REITs.

(Additional reporting by Aries Poon)

HK may open door to cross-border reits
SFC proposes to relax restrictions on reit listings
Enoch Yiu
31 March 2005
South China Morning Post

The Securities and Futures Commission plans to open the door for mainland and overseas property owners to list real estate investment trusts (reits), paving the way for Hong Kong to catch up with regional rivals.

After an 18-month study, the securities watchdog has proposed the geographic ban restricting reits to Hong Kong properties be lifted from June. The plan is subject to a month's consultation, starting yesterday.

While Hong Kong's first property trust listing, planned for December last year - the Housing Authority's $24 billion Link Reit - remains mired in a legal challenge, other markets are well ahead in the reit game.

Reits - funds pooling rental properties such as offices, car parks, retail outlets and serviced flats - got off the ground in the United States and Australia 40 years ago and have been floated in Japan and Singapore in recent years.

Fund managers have blamed the geographic ban as one reason Hong Kong trails the field. Other markets do not have the same restriction.

Alexa Lam, an executive director of SFC, said: "It has been a worldwide trend to have cross-border reits listing, and it is the right time to lift the ban in Hong Kong.

"In fact, we have already received several potential issuers who have expressed interest in issuing overseas property reits in Hong Kong."

The SFC's proposal, however, has raised concerns as some countries, including China, do not yet have a clear legal framework for land rights and titles. But Ms Lam said China had made significant progress on land rights during the past 18 months.

"It would be the responsibility of the fund management companies of the overseas reits to perform the due diligence and assess the risks of the overseas properties before offering them to Hong Kong investors," she said.

The reit management company would need sufficient resources and experience in the overseas property market to qualify for a licence issued by the SFC.

The SFC would regulate their management and, in extreme breaches of rules, it could revoke the licence and ask the reit trustee to appoint another manager.

Ms Lam believed both mainland and overseas property owners would be attracted to Hong Kong after the geographic relaxation.

Leading Asia reit issuer Macquarie Group welcomed the move. Nick Ridgewell, a division director of Macquarie Fund Management Hong Kong, said his firm would like to launch an overseas property reit and an industrial building reit in Hong Kong later this year.

$1.2b Xiamen port IPO to fund growth
Elliot Wilson, Hong Kong Standard
April 4, 2005

State-owned Xiamen Port Affairs, which runs China's seventh-largest container port, will launch an initial stock sale in early July, raising up to US$150 million (HK$1.17 billion), industry sources said. French investment house BNP Paribas Peregrine is underwriting the Hong Kong share sale.

Xiamen's deep-water port, which has benefited from foreign investment, booming exports and Fujian's growing economic clout, aims to become one of the world's leading ports by 2020.

It also adds to mounting pressure on Hong Kong's own world-class port operations. While Xiamen does not compete directly with the SAR, it underlines China's desire to become the world's leading shipping power and port operator, an ambition many believe will come at Hong Kong's expense.

Xiamen, ideally placed should the recent thaw in relations between Taiwan and the mainland result in detente and a resumption of direct trade, has grand plans of its own. While not as busy as larger mainland ports in Shanghai, Shenzhen and Qingdao, it last year announced plans to invest up to 14 billion yuan (HK$13.2 billion) over the next six years to expand capacity and throughput. A fresh injection of capital via an IPO will help its cause.

Its stated aim of becoming one of the world's top 20 ports by 2010 has also been aided by an injection of foreign capital. Hutchison Port Holdings, controlled by Li Ka-shing, owns several berths in Xiamen, and APM Terminals, the Dutch subsidiary of Danish shipping giant AP Moller-Maersk, last year announced plans to sink three billion yuan into a joint venture to build a three-berth terminal with Xiamen Port Group.

Xiamen's IPO, originally slated for the final quarter of last year, is just one of a swathe of China shipping-related IPOs slated for Hong Kong's stock exchange. COSCO Container Lines, or Coscon, is expected to raise up to US$2 billion in a stock sale now expected in the second half.

China Ocean Shipping recently said it aimed to raise US$1 billion from a share sale.

Analysts said the fundamentals for China-related shipping and port companies remains generally solid, due largely to growing trade between China and the rest of the world.

"As long as trade between the United States and China continues growing at the current levels, I see no reason not to invest in these companies," said UOB Kay Hian investment analyst Zhang Xi. "Xiamen would be a good choice. I don't see any slowdown in their trading activities."

China's ports handled 60.9 million twenty-foot equivalent units of containers in 2004, according to figures from the Ministry of Communications, up 27 percent year on year.

Xiamen's port grew at a slightly slower rate, handling 2.9 million TEUs last year, a 23.2 percent increase.

Phillip Securities research director Louis Wong said in the short term Xiamen faced competition from other mainland ports, highlighting rivals such as Nansha in Guangzhou and Yantian in Shenzhen.

But he also noted Xiamen's potential, its proximity to Taiwan, and China's willingness to keep its tightly controlled shipping conglomerates free - strategic investments in berths and terminals apart - of foreign capital.

"It's one of the few sectors completely protected," Wong said.

"China has a big market, too. Exports are growing fast, and demand for imported goods will be boosted tremendously in the future as income per capita in China increases."

Hong Kong Set to Change Accounting Standards for IPOs

BEIJING, April 4 Asia Pulse - Companies with listing plans in Hong Kong are being urged to be well prepared for the potentially significant impact of the changes in international and Hong Kong accounting standards on initial public offerings (IPOs) in the special administrative region.

Experts predict that listing in Hong Kong will become a more complex process as a result of the changes, made to improve the quality and consistency of standards and to achieve further global convergence.

"Mainland companies hoping for a Hong Kong listing are facing great complexity. They need to prepare now," said Conway Lee, a partner with Ernst & Young in Beijing.

To meet demand on the increased use of International Financial Reporting Standards (IFRSs) around the world, the International Accounting Standards Board (IASB) issued several new IFRSs and revised several existing international accounting standards in late 2003 and last year.

The Hong Kong Institute of Certified Public Accountants (HKICPA) announced that Hong Kong standards (HKFRS) would fully converge with IFRS effective for financial reporting periods beginning on or after January 1, 2005.

Accordingly, new standards have been issued by the Hong Kong CPA institute, and the existing standards have been realigned with IFRS.

Referring to the new and revised international and Hong Kong accounting standards, Lee said: "Companies which have Hong Kong IPO plans face an imminent task to understand the changes in international and Hong Kong accounting standards, and assess the impact on Hong Kong IPOs."

Some of the new and revised international and Hong Kong accounting standards deal with financial reporting issues which were previously unaddressed, such as share-based payments.

According to the new standards, all share-based payment transactions should be recognized in the financial statements, using a fair value measurement basis.

In particular, shares or share options granted to employees as remuneration should be recognized as an expense and included in the operating results.

Therefore, there will be a potential impact on management plans for employee share option schemes.

Consistent accounting standards and policies should be applied for the preparation of financial information throughout the track record period.

If any financial year or stub period within the track record period is a period beginning on or after January 1, 2005, financial information for that period in 2005 will need to be prepared under the new standards, and the new standards should also be applied to the previous three years.

But the old standards may still be applied when companies experience difficulties in dealing with the inconsistency between the track record results and the profit forecast for 2005, which should be based on the new standards.

Also, if there is a delay in the IPO timeframe, and the stub period financial information in 2005, companies will also feel it hard to present their accounting reports.

"The changes in accounting standards may have a significant impact on the IPO companies' financial information," said Lee, adding: "Early consultation with the professionals and seeking their assistance is of paramount importance."

January 1, 2005 is the beginning of a new era for financial reporting under IFRS and HKFRS, pointed out Ernst and Young.

According to Lee, companies planning a Hong Kong listing after the second half of this year will have to start preparing now for the new standards.

China Securities Regulatory Commission Chief Accountant Zhang Weiguo said the mainland's exchanges are also taking steps to follow the new international standards.

As China is gradually integrated into the global economy, the nation's bourses need to improve their accounting and auditing capabilities to bring them up to the international standards, said Zhang.

As international standards are revised based on years of experience in developed economies, it would be cost-effective to follow international standards, he said.

Experts believe training local professionals is critical, now that it is vital to keep up with the new standards.

What's more, recent corporate failures have also highlighted the need for enhanced training and development programmes for accountants and finance professionals.

But training professional accountants is not enough in order to ensure the proper execution of improved standards, said Zhang. Corporate management also needs to improve its knowledge of the equity markets.

But he added that the Chinese mainland's exchanges will still maintain some rules reflecting the special economic characteristics of the nation.

"China is so unique with a huge market, full of diversity. We cannot change everything overnight, and specific rules are required to reflect the local situation."

(XIC)

COSCO unit clears decks for $15.6b share offer
Elliot Wilson, Hong Kong Standard
April 7, 2005

China COSCO Holdings, the newly created shipping arm of sprawling mainland conglomerate COSCO, will sell shares in Hong Kong in late June to raise between HK$11.7 billion and HK$15.6 billion, sources said.

As a listed entity, China COSCO will act as an umbrella firm for its wholly owned COSCO Container Lines (Coscon) and COSCO Pacific, a red-chip container-to-ports company listed on Hong Kong's main board.

COSCO Pacific, 54.87 percent owned by China COSCO, will not be structurally altered by the offering.

The initial public offering will be underwritten by UBS and HSBC, which both declined to comment.

"The listing should be done by the end of June," a source said. "It can't go too far into July or it will be delayed."

Approval by Hong Kong Exchanges and Clearing could come as soon as early May.

China COSCO will channel the proceeds into fleet expansion, capital expenditure and debt reduction at COSCO Pacific. The possibility of foreign strategic investment prior to the IPO has not been ruled out, the sources said.

The IPO will be a boon to alliance partners Yang Ming Marine Transport of Taiwan, K Line of Japan and Korea's Hanjin Shipping, which stand to benefit from its aggressive expansion plans.

The three China COSCO partners, which have no big plans of their own to boost capacity, will get first option to lease the container ships that the company could buy with the IPO proceeds.

Boosting its fleet, notably for use on highly profitable trans-Pacific routes, will be China COSCO's primary concern following the share offer.

A lucrative IPO would also help China COSCO cement its position as the country's leading shipping firm.

Its Coscon unit is the mainland's leading marine operator, while COSCO Pacific is one of the country's biggest port operators and terminal lessors.

China COSCO hopes to create synergies by housing both entities under the same roof. Having lost ground to China Shipping Container Lines since the latter's HK$7.7 billion stock sale in June, COSCO is desperate to retain its position at the helm of the country's shipping sector.

"The theory is that shipping is cyclical, but ports are consistent. Slap the two together and you have an attractive stock for investors," said Sam Chambers, East Asia editor at maritime information provider Lloyd's List.

COSCO Group "will use the money to expand rapidly. Its chairman, Wei Jiafu, wants COSCO to be a top three [global] player by 2010 and that will cost a lot of money," he said.

"They are number four or five in the world at the moment and I can see them becoming number one," Chambers added.

COSCO Group now owns just over 600 container ships with a total dead weight of 36 million tonnes. Its Coscon division, operating on about 50 scheduled shipping routes around the world, owns and operates 120 vessels with a total capacity of 256,000 twenty-foot equivalent units.

The IPO seems to be well-timed. The mainland's shipping industry is riding high, aided by strong government protection, burgeoning exports and resurgent Asian and US economies. With exports and imports booming, several state-owned shipping firms are looking to sell shares publicly. In addition to China COSCO, a clutch of state-run ports in cities such as Shanghai, Xiamen and Dalian are looking to complete stock sales in the coming months.

Their IPOs should be aided by generally strong global sentiment for the sector. The Baltic Dry Index, the benchmark for shipping rates, ended Tuesday at 4,649 in London, below its December peak but still up 4 percent on the year. elliot.wilson@singtaonewscorp.com

Cosco Holdings Plans Offering
Hong Kong IPO Is Expected To Raise About US$2 Billion
Reorganization Under Way
By Sai Man and Jeffrey Ng Dow Jones Newswires
08 April 2005
The Asian Wall Street Journal

ENCOURAGED BY the rising fortunes of shipping companies plying booming container routes, China Cosco Holdings expects to raise as much as US$2 billion in an initial public offering in Hong Kong slated for June, people familiar with the matter said.

Bankers hired to sell the offering plan to start talks with institutional investors in May in a premarketing exercise to gauge initial interest for the deal, one of these people said. Two weeks of investor roadshows will be held around late May or early June.

Cosco Holdings is a newly created company under state-owned shipping firm China Ocean Shipping (Group) Co., known as Cosco Group.

Cosco Group said that in preparation for the listing it will inject into Cosco Holdings its container-shipping interests and its holding in Hong Kong-listed port operator Cosco Pacific Ltd. After the reorganization, Cosco Pacific will become a member of Cosco Holdings, with Cosco Group continuing to be Cosco Pacific's controlling shareholder.

UBS AG and the investment-banking arm of HSBC Holdings, both of which are managing the share sale, declined to comment.

Bankers are eager to launch the IPO soon before the shipping-boom cycle tails off. Analysts said that while profits in container shipping are at historic highs, there are concerns that shipping rates may cool off next year as more long-haul vessels add to total capacity, despite congestion worries, particularly in U.S. ports.

"The newsflow in the sector seems OK, but it depends how long the cycle will last," an equities banker said. "It may be difficult to sell the stock at a high multiple for a cyclical business."

In a recent research report, J.P. Morgan analysts Wai-Shin Chan and Peter Negline said they forecast "some modest pullback" in the global shipping cycle after this year, as the growth in shipping capacity accelerates.

Cosco Holdings will be the third company with interests in container shipping to list in Hong Kong, after Orient Overseas (International) Ltd. and China Shipping Container Lines Ltd. High shipping rates helped to boost the 2004 earnings of the two Hong Kong companies. China Shipping's 2004 net profit nearly tripled, while Orient Overseas doubled its bottom line.

ASIAN IPO FOCUS: Six HK IPOs Jumpstart New Listings Mkt
By Carmen Chan

HONG KONG (Dow Jones)--After months in the doldrums, Hong Kong's market for new listings is expected to get a jumpstart from US$9 billion worth of initial public offerings by six medium to large Chinese companies.

The local IPO market has been quiet since Air China Ltd. (0753.HK), China's largest airline, raised HK$8.36 billion in December. Since then there were five mostly small offerings of under US$100 million each. In contrast, there were 17 IPOs during the fourth quarter of last year, when the stock market was buoyant.

But the situation is changing.

Shanghai Electric Group (2727.HK), a medium-sized firm that makes equipment for the power and transportation industries, shook the IPO market out of its torpor in April by raising US$647 million - Hong Kong's biggest IPO so far this year. The company's shares will make their trading debut on Hong Kong's market Thursday.

Another five Chinese companies are now targeting offerings over the next three months, the biggest being China Shenhua Energy Co., the country's largest coal producer. It plans to raise US$3.5 billion in one of the city's biggest ever public offerings.

"As there has been little supply of proper Chinese plays for the IPO market, this will add some scarcity value to new issues," said Simon Aird, CSFB's head of equity capital markets syndication for Asia ex-Japan.

Bank of Communications, or Bocom, China's fifth-biggest lender, plans to raise US$2 billion.

Shenhua and Bocom are seeking simultaneous listings on the Hong Kong and Shanghai bourses, and the market is keeping a close watch on which will be first and how their shares perform.

That is because A shares, yuan-denominated shares listed in Shenzhen and Shanghai, trade at a premium to their H-share counterparts, the Hong Kong-listed shares of Chinese firms, and Beijing is keen to narrow the gap.

Separate listings have seen mainland investors, who cannot buy Hong Kong stocks, pay a premium for shares listed in China.

But in a simultaneous listing, the debut price of the A and H shares will be the same.

People familiar with the situation say Shenhua plans to raise US$2.5 billion from a Hong Kong offering and US$1 billion in Shanghai, while Bocom will sell US$800 million in Hong Kong and US$1 billion in Shanghai. HSBC PLC (HBC), which holds a 19.9% stake in Bocom, plans to subscribe to new shares to maintain the size of its holding.

The other three IPO candidates are China Minsheng Banking Corp. (600016.SH), the country's first privately owned bank, which aims to raise US$1 billion; container shipping company COSCO Holdings, which is planning a US$1.5 billion IPO; and R&F Properties Group, a developer in the southern city of Guangdong that is targeting a US$350 million offering.

Analysts expect all but R&F Properties to comfortably cover their IPOs.

Herbert Lau, research director at Celestial Asia Securities, said the real-estate developer may struggle to find investors given Beijing's measures to limit lending to the country's property market.

Shanghai Electric's market debut Thursday will be closely watched by the many Hong Kong investors who buy stocks less for fundamentals and more for making a quick profit on the early price gains of newly listed firms.

Shanghai Electric, whose IPO was moderately oversubscribed, priced its shares at HK$1.7 each.

Kenny Tang, an associate director at Tung Tai Securities, expects the company's shares to reach a high of HK$2 on their debut, boosted by the healthy state of China's heavy equipment industry.

Tang said if this batch of new listings achieves good prices on their debuts, they could put some vim back into the broad market, which has fallen 2.7% since the start of the year, due - among other things - to interest rate concerns.

Indeed, daily trading turnover has now fallen to just over HK$10 billion, around half the level of late last year.

However, analysts said they aren't worried the IPOs will put pressure on the city's stagnant equities market through investors selling stocks to bankroll their subscriptions on the expectation of early price gains.

"Investors are generally very cash rich at the moment and searching for investment opportunities," said Claudius Tsang, a fund manager at KDB Asia Ltd.

Additionally, expectations of an upward revaluation of the Chinese yuan is attracting speculative fund flows into Hong Kong's equity and currency markets.

"So the competition for capital isn't that keen," said Daniel Chui, head of investor communications at JF Asset Management.

EVA Precision to aim for $128m IPO
Lee Yuk-kei, Hong Kong Standard
April 29, 2005

EVA Precision Industrial Holdings, a designer and manufacturer of precision metal stamping molds and products, aims to raise HK$128 million in a Hong Kong initial public offering early next month to boost production capacity.

EVA will sell 130 million shares at HK$1.10 each, and has an option to raised HK$20.9 million from the sale. It plans to sell 10 percent of the offer to retail investors and the rest to institutional investors.

CAF Securities and SBI Crosby are the joint sponsors and joint lead managers of the listing.

The company said HK$32 million will be used to purchase machinery and equipment for plastic injection molds, HK$25 million to buy 25 sets of stamping machines for its existing production plant, about HK$35 million to set up a mold research and development center and HK$30 million to repay bank loans.

EVA's stamping products are mainly used in the manufacture of photocopiers and printers, as well as metal components and DVD components for car stereos.

It has more than 100 customers, mostly Japanese office automation equipment manufacturers such as Toshiba and Konica Minolta. Japanese customers comprised 77 percent of the company's total sales last year.

EVA recorded turnover of more than HK$296 million for the year ended December 31, a 77 percent increase on 2003, coupled with a 39 percent gross profit margin. Net profit grew 118 percent on-year from HK$30 million to HK$65.8 million.

Eva now has two factories on a 60,000 square meter site in Shenzhen, with 1,700 workers who earn 1,300 yuan (HK$1,225) a month on average. It is expanding its manufacturing facility in Shenzhen, where its third factory should start operations.

Shanghai Electric little changed in pre-market debut

HONG KONG, April 28 (Reuters) - Shares of Industrial equipment maker Shanghai Electric Group Co. Ltd., which raised US$648 million (HK$5 billion) in an initial public offering, were little changed from their IPO price ahead of their debut on Thursday.

State-owned Shanghai Electric priced its shares near the top end of an indicated range despite receiving a relatively lukewarm reception from investors. The IPO was the biggest of the year thus far in Hong Kong.

The stock was indicated at HK$1.71 in pre-open trade, one cent above its IPO price of HK$1.70.

Shanghai Electric's offering was 11.7 times subscribed in its retail portion and about 4 times covered in the institutional tranche.

Analysts and fund managers attributed the weak debut to a relatively demanding valuation, and poor market sentiment across Asia.

The company sold 2.973 billion shares, or 25 percent of its enlarged equity capital at HK$1.70 apiece, near the top of an indicated range of HK$1.50-$1.76.

Its valuation at 14.3 times 2005 earnings of HK$0.1189 per share is above mainland rivals Dongfang Electric and Harbin Power Equipment , which trade at 9.5 and 12.8 times forward earnings, respectively.

German conglomerate Siemens , which has power generation equipment joint ventures with Shanghai Electric, invested US$32.4 million in buying 148.65 million shares, or 1.25 percent of the firm through the IPO.

Shanghai Electric slips in Hong Kong debut

HONG KONG, April 28 (Reuters) - Shares of industrial equipment maker Shanghai Electric Group Co. Ltd. slipped in their debut on Thursday as investors, balking at its valuation, instead looked ahead to an IPO from China's biggest coal miner.

State-run Shanghai Electric priced its shares near the top of an indicated range despite generating a relatively lukewarm investor reception to its deal. Its US$648 million (HK$5 billion) IPO was the biggest of the year thus far in Hong Kong.

Analysts and fund managers said poor market sentiment across Asia contributed to the lacklustre showing.

Shanghai Electric ended the morning session at HK$1.69, down one cent from its IPO price of HK$1.70. It moved in a narrow band of HK$1.68 to HK$1.72 in the morning session with 394.28 million shares worth HK$671.76 million changing hands.

The index of China stocks traded in Hong Kong, known as H shares, was down by 0.67 percent in the morning session.

Power equipment accounts for nearly half of revenue for Shanghai Electric, which has benefitted from a plant building boom as China scrambles to eliminate an electricity shortfall.

While the company has forecast a 27 percent jump in net profit for this year to 1.5 billion yuan (US$181 million), market watchers say the sector is peaking and sales could decline in 2006 and 2007.

"With 2006 profit growth expected to slow, the current valuation looks expensive," said Clive Chang, chief investment officer at Partners Capital Asset Management, which opted not to susbcribe for IPO shares given the deal's pricing.

Shanghai Electric aims to triple export sales in the next few years to balance the expected decline in domestic demand.

The IPO was 11.7 times subscribed in its retail portion and about 4 times covered in the institutional tranche.

By comparison, mobile handset maker Foxconn International Holdings , which raised US$432.5 million in a January Hong Kong IPO, attracted orders for over 40 times the retail shares on offer and over 10 times the institutional shares.

COVETING COAL

Many investors are eyeing the initial public offering of China Shenhua Energy, the country's largest coal miner, which plans to raise US$3 billion as soon as May. The deal could be the largest overseas listing from a mainland firm since late 2003.

"The market is looking forward to Shenhua's IPO," said Chang.

"Coal mining is a strong sector and the only overseas-listed company is Yanzhou Coal . Unless it demands an expensive valuation, Shenhus's IPO will be hot"

Hong Kong, the main venue for overseas IPOs from China, saw just seven firms list in the first quarter of 2005, raising US$791 million. For all of 2004, 70 firms raised $12.3 billion in the city.

Shanghai Electric sold 2.973 billion shares, or 25 percent of its enlarged equity capital, at HK$1.70 apiece, near the top of an indicated range of HK$1.50-$1.76.

Its valuation at 14.3 times 2005 earnings of HK$0.1189 per share is above mainland rivals Dongfang Electric and Harbin Power Equipment , which trade at 9.5 and 12.8 times forward earnings, respectively.

German conglomerate Siemens , which has power generation equipment joint ventures with Shanghai Electric, invested US$32.4 million in the company, buying 148.65 million shares, or 1.25 percent of the firm through the IPO.

Credit Suisse First Boston underwrote the deal.

Sandmartin, Bauhaus aim to raise combined $226m
Wong Ka-chun and Carol Chan
28 April 2005
Hong Kong Standard

Sandmartin International, which makes satellite broadcasting equipment, and trendy fashion retailer Bauhaus International will list on Hong Kong's main board by early next month, raising up to HK$226.5 million combined, market sources say.

Sandmartin plans to sell 75 million new shares and 50 million existing shares at HK$1.08 to HK$1.5 each to raise up to HK$112.5 million. Part of the proceeds will be used to build a new plant to meet increasing orders.

Several existing shareholders plan to cash out as much as HK$54 million in shares from the initial public offering (IPO). Sandmartin has already postponed its IPO by a month and reduced the offer price by about 14 percent amid weak investor sentiment. It originally planned to sell shares at HK$1.36 to HK$1.74 each, sources said.

Bauhaus International aims to raise HK$91 million to HK$114 million with its IPO to fund expansion of its retail network. The price range has been set at HK$1 to HK$1.25 per share, according to sales documents.

Such prices value Bauhaus at 8-10 times historical earnings, a source close to the deal said. The company will issue 91 million new shares, representing 27 percent of enlarged share capital, with an option to sell 15 percent more. One-tenth of the offer will be initially set aside for Hong Kong retail investors and the rest for institutional investors.

According to Bauhaus's preliminary prospectus, the company paid HK$51.7 million in dividends to co-founder Wong Yui-lam and his wife Winnie Tong in the year ended March 31, 2004, though it earned only HK$41.3 million in the period. The company paid no dividends the two previous years. However, it plans to pay out only 30 percent of earnings as dividends after the IPO.

The IPO will dilute Wong and Tong's stake to 72 percent from almost 100 percent. The sale opens to retail investors Friday and lasts until next Thursday. The shares will begin trading May 12. Sun Hung Kai Securities is the listing sponsor.

"Demand from institutional investors was strong. The institutional tranche which closed Wednesday was more than five times oversubscribed,'' the source said.

A fund manager said the small size of Bauhaus's IPO and its low price- earnings ratio relative to other retail stocks accounted for the strong demand.

Bauhaus had 43 outlets in Hong Kong and Taiwan at the end of October. It operates under the Bauhaus, Tough, Salad, 80/20 and Libre names.

China Special Steel IPO eyes $333m
Specialist steelmaker braves lacklustre market that has put off other share offerings
7 May 2005
South China Morning Post

China Special Steel Holdings planned to raise up to $333 million from an initial public offering in Hong Kong next week, despite a lacklustre market for new listings in the past couple of months, sources said yesterday.

The Henan province-based firm, which manufactures a range of specialised steel for use in ball bearings, heavy-duty trucks and trains, is offering 180 million new shares at between $1.48 and $1.85 each, with 10 per cent earmarked for retail investors.

The public offering would open on Monday and close on Thursday, while the trading debut was scheduled for May 19, the sources said.

The offer may surprise some market watchers. Two other mainland steelmakers - China Guofeng Group and Kunming Iron and Steel - postponed the offerings planned for December and February respectively, as the steel industry battles with high raw material prices and government measures to prevent overheating in the sector.

Then Shanghai Electric Group broke a two-month drought on new Hong Kong listings with a $5.05 billion offer last month, and has struggled since its April 28 debut, still trading one cent below the offer price.

However, sources said China Special Steel and its sponsor Cazenove decided to go ahead with the offering after receiving a good response from fund managers during the pre-marketing process.

Fund managers also noted that the bearing and spring steel produced by China Special Steel is vastly different from that produced by generic steelmakers such as Guofeng and Kunming. The entry barrier in the special steel sector was also greater, they said.

China Special Steel would become the first mainland special steelmaker listed in Hong Kong.

The offer "comes at a good price and at a low point for the sector so the risk is very low", said Yang Liu, managing director at Atlantis Investment Management.

Fund managers in general are underweight the steel sector at present, so if there is a recovery in the industry it could have a significant positive impact on the share price, she added.

Ms Yang said China Special Steel was offered at about five times 2005 earnings, while other market sources said the indicative price corresponded to 6.1 to 7.7 times its 2004 earnings.

Earlier this week, chairman and chief executive Dong Shutong said the outlook for the special steel industry remained strong despite falling margins and overcapacity in the broader market for general construction-grade steel.

"The room for growth and development is especially good now," Mr Dong said.

According to market sources, proceeds from the float will be used to refine its production process purchase equipment and raw materials and reduce debt.

According to Mr Dong, the firm is also considering acquisitions.

China firms look to HK expertise - Territory seen as a stepping stone to overseas capital markets, says TDC
Elaine Chan
5 May 2005
South China Morning Post

Most mainland private firms aim to leverage off Hong Kong's role as an international financial centre to tap overseas markets and capital, but their limited financial strength is hindering the ambition for the moment, according to a survey.

The Hong Kong Trade Development Council (TDC) found that 66.8 per cent of 334 private firms from the eastern Jiangsu and Shandong provinces wanted to expand internationally, but nearly 59 per cent of respondents cited insufficient funds as the main obstacle. Another 40.9 per cent said a lack of expertise was a factor.

The majority of companies - 58.9 per cent of the respondents - said they intended to set up a unit or appoint an agent in Hong Kong in the next one to two years.

Edward Leung Hoi-kwok, TDC's chief economist, said the financial services sector would benefit most should more private firms look to raise funds in Hong Kong.

Mr Leung said he expected between 100 and 200 private firms to tap Hong Kong's financial services this year. "[Chinese] manufacturers and exporters are the ones needing most to expand internationally" amid growing domestic competition from foreign players, Mr Leung said yesterday.

Last year, mainland private firms exported a total US$101.16 billion worth of goods, TDC figures showed.

According to the Ministry of Commerce, China absorbed as much as US$560 billion in foreign direct investment between 1979, when economic reform was introduced, and the end of last year.

In contrast, Chinese direct investment abroad totalled only US$37 billion during that period.

The Beijing-backed Economic Information Daily quoted Chen Qingtai, a deputy director of the State Council's Development Research Centre, as blaming the central government's high-handed administrative approval process for slowing the pace of overseas expansion by mainland firms.

He said "excessive interference" by numerous government departments had translated into "high costs, low efficiency ... weakening enterprises' sense of responsibility and risk awareness".

Since January, private firms planning to list in Hong Kong and overseas have had to be vetted by the State Administration of Foreign Exchange as it attempts to control hot money inflows and the sale of undervalued assets.

In Hong Kong, no rush to REITs
By Joshua Fellman Bloomberg News
THURSDAY, MAY 12, 2005

HONG KONG The introduction of rules in Hong Kong meant to encourage property owners to sell real estate investment trusts probably will not entice any of the city's big developers, say investors, property company executives and academics.

The Securities and Futures Commission next month will let trusts hold properties outside the city, including in mainland Chinese centers such as Shanghai and Beijing, the regulator said last week.

"Many big listed companies in Hong Kong don't really have an incentive to push out REITs," said Peter Churchouse, a fund manager at Lim Advisors in Hong Kong. "And if it's a Mickey Mouse property company from Tianjin or Dalian, the regulators will be very careful."

Hong Kong, which is seeking to broaden the variety of financial products traded in the city, does not yet have a locally listed REIT.

In December, a $2.7 billion sale by the Housing Authority collapsed because of a lawsuit. In 2003, the magnate Li Ka-shing listed his Fortune Real Estate Investment Trust in Singapore, initially raising 906 million Hong Kong dollars, or $116 million.

Analysts said the changes would not spur developers because - unlike Singapore, Australia and the United States - Hong Kong offered real estate trusts no tax advantages. They also said that developers, banks and insurance companies in Hong Kong did not have a lot of distressed assets that they could inject into REITs.

Those who were most likely to seek to sell real estate trusts first might be the many individual real estate owners in Hong Kong, said Douglas Arner, deputy director of the Asian Institute of International Financial Law.

"These people are not really developers, but property investors who look at the REIT as an opportunity to acquire more capital or liquefy a portfolio," Arner said in a phone interview. REIT sales, which are asset backed, should be easier to arrange than initial public offerings of equities, he said.

REITs hold completed properties that generate rents. The trusts, which have lower risks and costs than property developers, must pay a fixed percentage of income to unit holders and have limits on their borrowing. In Singapore, the United States and Australia they have tax advantages over regular business corporations.

Li Ka-shing's Fortune REIT has risen about 37 percent since listing in 2003, compared with a 28 percent gain in Singapore's benchmark Straits Times index and a 40 percent increase in the property index. Suntec Real Estate Investment Trust, in which Li also has a stake, has risen 23 percent since listing in December, compared with gains of 7 percent and 10 percent, respectively.

Hong Kong's property companies are generally valued at discounts to their net asset values, which are at historically low levels, said Churchouse at Lim Advisors. Sun Hung Kai Properties, Hong Kong's biggest developer, closed Tuesday at 75.50 dollars a share, a 16 percent discount to Citigroup's estimate of its net asset value of 90 dollars per share.

"The REIT industry will really take off in China for all the reasons it won't in Hong Kong," Churchouse said. "Chinese developers are highly leveraged, undercapitalized and the industry is extremely fragmented. A lot of nonperforming property assets are going to end up in the banks."

REITs from Chinese companies probably would not be listed in Hong Kong for the moment because of questions about title, debt and other risks, Churchouse said. Regulators would probably be cautious because REITs are meant to be targeted at individual investors, he said.

Hong Kong-based companies with real estate in China said that while they might eventually use REITs as a way of raising money from their holdings, especially in the mainland, they were in no hurry to enter the market.

"This is something we'll probably do eventually," said Gareth Williams, property investment director at Wheelock Properties (Hong Kong), who helps manage real estate owned by Wheelock and by Wharf (Holdings). "The yields are better in China. We'll look at it when the opportunity arises."

Wheelock and Wharf are two of Hong Kong's largest real estate owners. The companies hold some of Hong Kong's largest shopping centers and mixed-used complexes in mainland China.

Martin Cubbon, group finance director at Swire Pacific, one of Hong Kong's biggest office landlords, said the company saw no advantage to shareholders from spinning off its assets into REITs, especially given that the real estate market in Hong Kong is very liquid, making it easy to sell buildings.

"It could allow for earlier funding of our new products in China," Cubbon said in a phone interview. "It's not an immediate opportunity for us. It's a market that will in time go, but it's not going to explode."

Should Hong Kong property companies sell REITs, investors would probably be interested because the trusts offer relatively high returns and low risk, said Churchouse at Lim Advisors and Eva Lee, senior analyst at Macquarie Securities.

Hong Kong REITs must pay 90 percent of their income to unit holders and have debt of no more than 35 percent. Unlike property developers, REITs are not at risk from problems connected to construction of buildings such as cost overruns and delays.

"Investors can diversify their exposure to different types of property classes - residential, retail, office, and industrial, etc. - with much smaller amounts of capital," Lee said.

Big IPOs face bumpy ride
Elliot Wilson, Hong Kong Standard
May 20, 2005

Two of the biggest Hong Kong stock sales of the year - Bank of Communications and China Cosco Holdings, should finally be approved next week, with bankers hopeful that both will hit the markets running by the time June is out.

The stock exchange's listing committee will sit in a special session on Monday to consider BoCom's US$1.5 billion-US$2 billion (HK$11.7 billion-HK$15.6 billion) initial stock sale. The Shanghai-based lender, one-fifth owned by HSBC, scrapped plans to sell shares in Shanghai this month, smoothing the way for its stock sale in the SAR. Next Thursday, the listing committee will decide whether to approve China Cosco Holdings' US$1.5 billion-US$2.0 billion Hong Kong stock sale.

The recently-created company acts as an umbrella firm for its wholly owned Cosco Container Lines (Coscon) and Cosco Pacific, a red-chip container-to-ports company listed on Hong Kong's main board.

HSBC and Goldman Sachs are underwriting BoCom's stock sale, with UBS and HSBC acting as lead managers on China Cosco's public offering. Officials at the three investment banks and BoCom declined to comment. China Cosco could not be reached for comment.

Both BoCom and China Cosco "could have very bumpy listings, said Yang Liu," investment manager of Atlantis Investment in Hong Kong. "Market sentiment is extremely poor - it is not in favor of any IPOs at the moment. All the big (companies) are eager to come to market, and I don't think they will be very well received."

Two other stock sales - Shanghai Electric's US$650 million IPO last month and China Shenhua Energy's stock offer, currently being marketed to investors, have kept the markets ticking over in recent weeks.

A couple of major stock sales by mainland companies would provide a further timely boost for Hong Kong's jittery markets.

Under normal market conditions, BoCom and China Cosco should have little trouble attracting investors. However, rising interest rates, stubbornly high oil prices and fervid currency speculation in both Hong Kong and the mainland have raised concerns among both local and international investors. "I have reservations about both issues. Maybe both IPOs will have to be reduced in size, and in terms of pricing we may have to see some reduction," said Louis Wong, managing director at Phillip Securities.

"For BoCom the problems are credit quality, NPLs and corporate governance. Investors are quite worried about those issues."

Wong said the key concerns for China Cosco were a plummeting Baltic Dry Index - down 25 percent in the past month - and a lower-than-expected rise in trans-Pacific shipping rates.

Minsheng Bank share offer may be pushed back to July
Carol Chan, Hong Kong Standard
May 24, 2005

Minsheng Banking Corp, China's first private lender, may need to push back its Hong Kong initial share sale to July as it still has not scheduled a hearing with the stock exchange, banking sources said.

The sources did not explain why no meeting with the exchange's listing committee has been scheduled for the share sale, which could raise US$800 million (HK$6.24 billion).

Minsheng hopes to complete its Hong Kong IPO by mid-2005. "We are working very hard for the listing. Hopefully, it will take place at the end of June. If not, it will be in early July," a banker close to the deal said.

It usually takes about four weeks of preparation after the hearing before the shares can be listed.

Minsheng Bank, whose shares are traded in China's A-share market, has been struggling since 2003 to get a Hong Kong listing as its domestic investors were worried their interest may be diluted as valuation of mainland stocks are higher than in Hong Kong.

The bank had hoped to launch an IPO last year, but was delayed by the sale of a 4.55 percent stake to Singapore government investment agency Temasek Holdings. Sources earlier said Temasek may buy 10-20 percent of the shares on offer.

Minsheng Bank will compete almost head-to-head with another mainland bank listing hopeful, Bank of Communications, the country's fifth-largest lender, which is also aiming to list its shares by the end of June to raise about US$1.5 billion.

Minsheng Bank's first-quarter profit rose by about one-third to 605.9 million yuan (HK$570.6 million) after jumping 47 percent to 2.04 billion yuan last year.

Its bad-loan ratio stood at 1.28 percent at the end of June 2004, compared to an average of 13 percent at state-owned banks. The bank said last week it plans to open between six and eight branches in the mainland by 2007 in such cities as Qingdao, Xiamen and Shenyang.

COSCO wins $2b IPO nod
Elliot Wilson
27 May 2005
Hong Kong Standard

China COSCO Holdings, the shipping arm of mainland conglomerate China Ocean Shipping (Group) Company, has won approval from the Hong Kong stock exchange for its US$1.5 billion to HK$2 billion initial share sale, according to market sources.

China COSCO will begin pre- marketing Monday, with full marketing of its initial public offering to begin on June 13.

If all goes to plan, shares in China COSCO should begin trading on Hong Kong's main board in the final week of next month.

The company is unlikely to bring in strategic investors to close the deal, though sources said there has been ``strong interest'' from a group of corporate investors.

By contrast, China Shenhua Energy, which is marketing its up to US$3.6 billion IPO, has stockpiled a clutch of strategic investors, including several Hong Kong tycoons prior to its local stock sale.

China COSCO, an umbrella organization housing COSCO Container Lines (Coscon) and COSCO Pacific, a red-chip container-to-ports company listed in Hong Kong, is choosing a busy time to come to market.

A clutch of key mainland firms are expected to complete initial share sales next month, flooding a market with new paper despite investor unease centering on high oil prices, rising interest rates and a flurry of currency speculation.

Apart from Shenhua, Bank of Communications also hopes to raise between US$1.5 billion and US$2 billion from its Hong Kong IPO next month.

China Minsheng Banking Corp is also racing to list its shares in Hong Kong.

China COSCO plans to channel the stock sale proeeds into fleet expansion and capital expenditure, and cutting debt at COSCO Pacific, which is 54.87 percent owned by China COSCO. COSCO Group owns just over 600 container ships with a total deadweight of 36 million tonnes.

The group's Coscon division, operating on about 50 scheduled shipping routes around the world, owns and operates 120 vessels with a total capacity of 256,000 twenty-foot equivalent units.

The IPO should also boost China COSCO's alliance partners Yang Ming Marine Transport of Taiwan, K Line of Japan and South Korea's Hanjin Shipping, which stand to benefit from its aggressive expansion plans.

Bank of Communications Plans Hong Kong IPO
Friday May 27, 12:03 am ET

SHANGHAI, China (AP) -- The Bank of Communications, China's fifth-biggest state-owned commercial bank, plans to sell shares in Hong Kong as early as next month, state media reported Friday.

The initial public offering by the Shanghai-based bank is one of a spate of multibillion-dollar (euro) share listings by mainland based companies seeking to raise cash overseas.

Roughly $7 billion worth of China IPOs are expected in Hong Kong over the next couple of months, starting with Chinese coal producer China Shenhua Energy Co., which could raise as much as $3.63 billion if shares sell at the top end of its pricing range.

Bank of Communications plans to sell 6.9 billion shares at between 1.9 Hong Kong dollars and HK$2.30 (22 U.S. cents to 29 U.S. cents), aiming to raise between HK$13.2 billion to HK$15.6 billion ($1.7 billion to $2 billion), the state-run newspaper China Securities Journal reported, corroborating earlier reports.

Meanwhile, China COSCO Holdings, the shipping arm of conglomerate China Ocean Shipping (Group) Company, has won approval from the Hong Kong stock exchange for a US$1.5 billion initial share sale, the Hong Kong newspaper the Standard reported.

Citing market sources, the newspaper reported that China COSCO will begin marketing its IPO next month.

China Construction Bank says it will offer shares in Hong Kong
Mon May 30, 7:47 AM ET

SHANGHAI (AFP) - China Construction Bank (CCB) -- one of the country's largest state lenders that is mired in scandal -- said it will offer shares in Hong Kong as it presses ahead with its long-awaited plans for an initial public offering.

The listing plan has yet to be approved by regulators, and as such, no date has been set, bank spokesman Fan Yifei said Monday.

The announcement comes as the bank removed two senior officials in an apparent bid to clean up its image ahead of the share sale.

The heads of two provincial branches were blamed and dismissed for financial irregularities at branches under their command, according to a report by Xinhua news agency Sunday.

Like so many Chinese banks, CCB has been riddled with corruption problems, yet Beijing must ensure that it moves ahead with a listing in order to draw funds and make it more competitive before the financial sector opens to foreign competition at the end of 2006.

Graft was discovered at the highest level in March, with the chairman of CCB, Zhang Enzhao, resigning amid reports that he had taken one million dollars in kickbacks from a US bank and then falsified order records.

If all goes according to plan, CCB would be the first overseas IPO of the country's big four state-owned banks, which also include Bank of China, Agricultural Bank and Industrial and Commercial Bank.

Mainland Chinese analysts remained skeptical of the bank being able to sufficiently overhaul and improve operations to make them function like public Western banks.

"Actually I don't expect that the quality of the bank can be improved thoroughly before its listing," said Wu Yonggang, banking analyst from Guotai Junan Securities.

However, Wu said that the reforms to date would still likely be enough for it to list some time in 2005.

"It's very likely that it will get listed within this year," he said.

Former forex chief Guo Shuqing, who was appointed after Zhang resigned, said this month that only "extraordinary circumstances" would impede a share sale.

CCB had a non-performing loans ratio of 3.47 percent at the end of March, compared with a 3.7 percent NPL ratio at of end of 2004.

China's banks, and CCB is no exception, have long struggled with severe debt problems, a major hangover from the country's central planning days when easy credit was granted without concern about repayment of the loans.

In December 2003, the CCB and Bank of China received 22.5 billion dollars each to tidy up their balance sheets.

Regulators hope that pushing state-owned banks to go public will bring greater transparency to the sector.

"The listing could be an impetus and investors' supervision will force the bank to do better," agreed Wu.

In April China's banking watchdog set a deadline of one year for state-owned commercial lenders to do something about a growing incidence of financial crimes.

CCB is also considering selling shares on China's domestic A-share markets and on other bourses, Fan said.

It remains unclear how much CCB wants to raise but local financial media have speculated that it could be around 40 billion yuan (4.8 billion dollars).

According to earlier reports, the institution is preparing to sell stakes totalling 10 percent to three unnamed foreign investors, several of whom it is already talking too.

US based banking giant, Citigroup, which is advising CCB on the IPO, is also believed to have pledged to buy a stake in the bank.

Apparently, as a further incentive, the lender may offer potential foreign investors senior executive posts or board positions if they take a stake in the company. The bank is also considering taking on overseas employees, Fan said.

Yurun Food hopes to tap $1.2b from Hong Kong debut
May 31, 2005

A Chinese meat processor, one of the country's largest private firms, plans a Hong Kong IPO in the second half of 2005 worth up to HK$1.2 billion, sources familiar with the situation said.

Jiangsu Yurun Food Group, based in Nanjing, aims to be the latest mainland firm to take advantage of investor interest in the rising spending power of Chinese.

The company has hired Wall Street firm Goldman Sachs to underwrite its listing, the sources said. Both the firm and Goldman Sachs declined comment on Monday.

Yurun Food had operating turnover of 6.23 billion yuan (HK$5.85 billion) in 2003, making it China's 29th-largest non-state enterprise, according to Xinhua.

The firm has expanded through acquisitions of state-owned food processors, according to its Web site. It exports to other Asian countries as well as Russia. Its founder, Zhu Yicai, was ranked as China's 41st-richest business person on Forbes magazine's 2004 list. Yurun's competitors include Singapore-listed People's Food Holdings.

Recent initial public offerings by mainland Chinese food and beverage companies in Hong Kong have proven popular. In January, Dynasty Fine Wines Group raised US$86.5 million (HK$674.7 million) in a Hong Kong listing that drew heavy demand. Shares in China's second-largest winemaker ended 27.7 percent above their IPO price on Friday, and trade at 19 times forecast profits.

Top mainland milk producer China Mengniu Dairy, which listed in a popular deal last year, saw its shares close 26 percent above their listing price on Friday. The stock trades at 16.5 times forecast earnings.

REUTERS

COSCO Holdings cuts Hong Kong listing size to 1.35-1.7 bln usd - report
31 May 2005

BEIJING (AFX) - China COSCO Holdings, the newly-created shipping arm of mainland conglomerate China Ocean Shipping (Group) Co (COSCO), has reduced the size of its Hong Kong offering by 10-15 pct to between 1.35-1.7 bln usd, the Hong Kong based Wen Wei Po reported.

The company was previously approved to issue 36.6 pct of its total equity, planning to raise a total of 1.5-2 bln usd.

The paper cited unidentified sources as saying that the company will begin its official road show on June 13 and set its IPO price on June 25. Shares are scheduled to begin trading from July 4.

The company was not immediately available for comment.

The report said that the offering will be underwritten by the UBS, HSBC and J.P. Morgan.

COSCO Holdings plans to spend 1.8 bln usd on shipping capacity expansion and port construction, aiming to increase its capacity 170 pct to 800,000 twenty-foot equivalent units (TEUs) in 2010, the report added.

The report also said that Henderson Land chairman Lee Shau Kee, Hutchison Whampoa Ltd and Cheung Kong (Holdings) are planning to buy an unspecified number of shares in the upcoming IPO.

COSCO Holdings 2004 total revenue was up 24.5 pct at 32.19 bln yuan while net profit rose 139 pct to 4.16 bln.

(1 usd = 8.3 yuan)

HK's formula for developing public confidence in exchanges
Friday, June 3, 2005
Government Press Release

The Secretary for Financial Services and the Treasury, Mr Frederick Ma, today (June 3) shared with participants of an international forum in Beijing Hong Kong's formula for successfully building public confidence in stock exchanges, which is crucial to the development of exchanges.

Speaking at the World Federation of Exchanges Forum for Developing Markets, Mr Ma said the formula Hong Kong adopted was to develop and strengthen confidence in the efforts of Government, the statutory regulator and the exchange itself as well as other law enforcement agencies.

Mr Ma pointed out that Hong Kong had a three-tiered structure for the regulation of the securities and futures industry - the Government, the Securities and Futures Commission (SFC) as the statutory regulator; and the Hong Kong Exchanges and Clearing Limited (HKEx) as a market operator and frontline regulator.

Noting that the primary role of the Government was to provide a favourable environment under which the financial markets could develop and prosper, Mr Ma said the Government's policy was to maintain and further upgrade the quality of financial markets so as to protect investor interest and thus strengthen investor confidence.

"To this end, we have made tremendous efforts to establish a world-class regulatory framework and foster strong corporate governance," Mr Ma said.

The second tier, the SFC as the statutory regulator, is independent from the Government and has its own governing body and statutory powers with checks and balances provided under the law, Mr Ma pointed out.

Noting that the SFC had the statutory responsibility to supervise and regulate activities carried out by the exchanges to ensure the markets were orderly, informed and fair, Mr Ma said: "Public confidence in the statutory regulator's ability in promoting an orderly market and monitoring exchanges depends not only on the strength of its 'regulatory teeth', but also the transparency and accountability of the regulator."

As to the third tier - the HKEx - Mr Ma said it had done an excellent job in providing orderly and fair markets for the trading of securities and futures, putting in place systems to manage risk prudently, and providing reliable infrastructure. It also had well-established systems to ensure accountability, transparency and avoidance of conflicts of interest as well as its determination to maintain high market quality in the execution of its listing functions.

On top of the three-tiered regulatory structure, Mr Ma said the excellent work of other law enforcement agencies had added credibility to Hong Kong's regime. The Police and the Independent Commission Against Corruption worked closely with the SFC in taking enforcement action against corporate misconduct.

With the concerted efforts of the Government, the statutory regulator, the exchange and other law enforcement agencies, Hong Kong's exchanges had gained confidence from not only local investors, but also investors from around the world, Mr Ma said.

"Certainly, we can't be complacent and must keep up with our efforts in enhancing our market quality and strengthening investor confidence in our exchanges," Mr Ma said.

Besides taking part in the forum, Mr Ma also met during his stay in Beijing with Mainland officials, including the Governor of the People's Bank of China, Mr Zhou Xiaochuan; Chairman of the National Social Security Fund, Mr Xiang Huaicheng; Vice Minister of Finance, Mr Lou Jiwei; and Administrator of State Administration of Foreign Exchange, Ms Hu Xiaolian.

Caution greets IPO wave
Gladys Tang and Wong Ka-chun, Hong Kong Standard
June 7, 2005

Fund managers watch fundamentals as share sales worth $65b come to market

http://www.thestandard.com.hk/stdn/std/Front_Page/images/ipo0607.jpg

With four mega-offerings worth a combined HK$65 billion about to hit a market that's trading where it was seven months ago, you'd have to figure buyers will have the upper hand.

That's the situation facing investment bankers tasked with selling shares in four mainland newcomers to Hong Kong's main board - China Shenhua Energy, Bank of Communications, China COSCO and China Minsheng Banking Corp - all of whom plan to sell shares in the next few weeks in the biggest wave of IPOs to hit the market this year.

Caution is the byword among fund managers. "We have to make sure the valuation and fundamentals of the company are really good to make a buy," says Standard Life Investments investment manager Agnes Deng in a typical comment. "We may not invest" otherwise.

Or to put it more simply: "The cheaper, the better," says Atlantis Investment Management managing director Liu Yang.

That notion is already costing the mainland's biggest coal miner, China Shenhua, which will probably price its IPO at around HK$8 a share, at the mid-low end of its price range of HK$7.25 to HK$9.25, thanks to a muted response from retail and institutional investors.

That's not to say Shenhua executives will head home with long faces. The expected pricing would still value the company at 10-11 times forecast 2005 earnings, a substantial premium over the price now fetched by shares of Yanzhou Coal Mining, the only Chinese coal miner with an overseas listing. It shares change hands at just 7.6 times the company's forecast 2005 profit.

The offering drew a respectable response from investors - the institutional portion being five times oversubscribed and the retail portion 20 times, sources said.

The coal miner hopes to raise as much as HK$28.3 billion from the IPO, the world's biggest so far this year.

Liu says other listing candidates may have to ape Shenhua and set their prices lower than they'd like in order to attract buyers. "Funds in the market are limited," she explains.

"Market sentiment right now is not too robust," Deng adds. "Investors are concerned about global growth slowing down... We are cautious on the upcoming IPOs."

While Shenhua benefits from relative scarcity - there is, after all, only one dominant coal miner - Bank of Communications could suffer from the plethora of choices Hong Kong investors may soon have on offer.

While the mainland banking business "looks good," as Shenzhen Tianrong Investment Corporation chairman Li Haojie puts it, investors need not fret about missing out on an opportunity to take a flier if they skip BoCom's sale - or Minsheng Bank's either. And seeing how these two banks fare once their shares begin trading could make it easier for investors to value future bank offerings. "You don't need to rush into it [Bank of Communications] because there will be more choices," says Yang,

"The stock performance of Bank of Communications, the first mainland bank to float shares in Hong Kong, will serve as a benchmark" for future sales of such mainland giants as China Construction Bank, which hopes to sell shares in November, and Bank of China, which wants to go to market early next year.

Coal firm's IPO fails to fire up market
Eric Ng and Fiona Lau
7 June 2005
South China Morning Post

China Shenhua Energy's US$3.6 billion global share offering was receiving a lukewarm response with less than 24 hours to go before the order book closed, sources said late yesterday.

The institutional tranche of the coal producer's initial public offering was less than five times covered by early evening yesterday, while the retail portion - accounting for 5 per cent - was expected to be 10 to 15 times subscribed by today, they said.

Retail interest has been dampened by higher interest rates and margin financing costs. The retail offer closes at noon.

Some fund managers are cautious on the outlook for coal prices in the mainland.

Mandy Chan, a fund manager at ABN Amro Asset Management, said: "There is concern that domestic coal demand growth will slow in coming years due to macroeconomic tightening.

"We are worried that the coal price is peaking soon."

The listing's global co-ordinators - China International Capital Corp, Deutsche Bank and Merrill Lynch - declined to comment.

Malaysian tycoon bets on IPO for Cambodian casino
Zach Coleman, Hong Kong Standard
June 8, 2005

NagaCorp, a Cambodian casino operator owned by Malaysian tycoon Chen Lip Keong, is planning to float its shares on Hong Kong's stock exchange after its listing plan was rejected by Singapore two years ago, sources said.

NagaCorp, which runs the only legal casino in Cambodia's capital city Phnom Penh, has applied to list on the Hong Kong stock exchange, according to people familiar with the matter.

The new application would reprise NagaCorp's 2003 Singapore application. It proposed then to sell 20-25 percent of its shares for about S$100 million (HK$468 million) in an offering underwritten by SBI E2-Capital Securities and UOB Kay Hian that would have been Singapore's first gambling listing.

Chen was blocked in 2000 from injecting NagaCorp into a Malaysia-listed company he controls because the Malaysian exchange's rules then declared such overseas operations out of bounds.

Anglo-Chinese Corporate Finance is among the banks working on the Hong Kong application, but not SBI or UOB. A Hong Kong stock exchange spokesman said he could not confirm individual listing applications and NagaCorp executives involved in the application could not be reached.

The Monetary Authority of Singapore blocked NagaCorp's previous application on the grounds that the company's operations were "not subject to a fully developed and implemented legal and supervisory framework for the regulation of casinos and the prevention of money laundering.''

The agency also faulted the lack "of an established track record of independent audits of the effectiveness of its internal controls for addressing money laundering risks.''

The Hong Kong exchange only opened its door to gambling-related listings a few months before NagaCorp's Singapore application. Dozens of listed companies have since announced investments in casinos in Macau and other countries as well as cruise ships. Circulars issued by these companies this year have contained provisions indicating the Hong Kong exchange's interest in making gambling firms commit to combating money laundering too.

Since NagaCorp's rejection by Singapore, Cambodia has joined the Asia-Pacific Group on Money Laundering. Joining this alliance of 28 governments committed the country to strengthen its controls on money laundering.

NagaCorp's Singapore prospectus reported the company earned US$29.9 million (HK$233.22 million) on US$61.7 million in revenue in 2002 and US$31 million in profit on US$67 million in 2001.

Hong Kong Billionaire, Temasek to Buy China Cosco IPO Stakes

June 10 (Bloomberg) -- Hong Kong billionaire Li Ka-shing and the Singapore government's investment arm plan to buy a $300 million stake in Cosco Holdings Co., China's biggest container shipping company, people familiar with the matter said.

Li's Hutchison Whampoa Ltd., the world's biggest port operator, and Singapore's Temasek Holdings Pte will each put $150 million in Cosco, said the people, who declined to be identified. Their combined stakes account for 18 percent of the Hong Kong- based company's $1.7 billion planned initial public offering.

"The IPO is going to succeed with such a big chunk of stock going to the investors,'' said Norman Ho, a fund manager at Value Partners Ltd. in Hong Kong, who helps oversee $2 billion. "The industry isn't very attractive as it's almost reached the top of the cycle.''

Cosco derives more than 80 percent of its sales from container shipping and the company's earnings may be hurt next year as freight rates slide. Freight rates, which soared during a four-year boom in Chinese exports to the U.S. and Europe, may drop in 2006 as fleets expand, London-based Drewry Shipping Consultants Ltd. forecasts. Capacity may grow 16 percent next year, almost twice as fast as demand, Drewry said.

Cosco's profit may fall 18 percent next year to 3.5 billion yuan ($423 million), according to research from HSBC Holdings Plc, which is arranging the share sale with UBS AG. John Ryan, an HSBC spokesman in Hong Kong, and UBS's Mark Panday declined to comment. Bruce Shu of Citigate Dewe Rogerson, who's handling media questions for Cosco, also declined to comment.

Temasek spokesman Eva Ho and Hutchinson's Laura Cheung declined to comment.

Chinese IPOs

"Li has shown good interest in China's infrastructure- related projects including toll roads and ports,'' said Renault Kam, who helps manage $1.5 billion at Atlantis Investment Management Ltd. in Hong Kong. "Taking a stake in a container shipping company may help boost its port business and bring down overall freight costs.''

Cosco also has held talks about selling shares to 77-year- old billionaire Lee Shau-kee, people familiar with the situation said last month. Colin Lam, vice chairman of Henderson Land Development Co., which was founded by Lee, didn't return calls.

Lee, the world's 38th richest man according to the Forbes annual survey of billionaires, was among five investors who agreed last month to buy $500 million of shares in China Shenhua Energy Co., the nation's biggest coal producer. Shenhua this week sold a less-than-expected $2.95 billion of stock on concern prices for the fuel will end a three-year rally.

Shenhua was the first of six state-owned Chinese companies seeking to raise about $15 billion in IPOs before the end of the year. China Construction Bank, the nation's third-biggest lender, plans to sell $5 billion of stock as soon as October, and China Minsheng Banking Corp., the country's first publicly owned bank, plans to raise as much as $880 million this year. China National Coal Group Corp., the country's No. 2 coal producer, and its fifth-biggest lender, Bank of Communications, also plan offers.

HK-SG joint investment :)

HK PRESS: China BoCom IPO Likely Pricing At Top Of Range
Friday June 10, 2005, 10:15 am

HONG KONG (Dow Jones)--Bank of Communications' (3328.HK) US$1.9 billion initial public offering may be priced at HK$2.55 a share, the high end of the indicative range, Ming Pao Daily reports, citing sponsors of the deal.

A price range of HK$1.95-HK$2.55 a share has been set for China's fifth biggest lender.

BoCom is expected to list on June 23, with the IPO price to be fixed on June 17. Goldman Sachs and HSBC Holdings Plc (HBC) are sponsoring the listing.

The newspaper cited sponsors saying the institutional tranche was well oversubscribed, and it was very likely the IPO shares will be sold at HK$2.55 each.

Newspaper Web site: http://www.mingpao.com

Link Reit fiasco fails to deter French firms from testing the waters
11 June 2005
South China Morning Post

Despite the Link Reit fiasco last year, in which a multibillion-dollar deal to privatise and list government-owned car parks and shopping centres was derailed by determined elderly housing-estate residents, demand for real estate investment trusts (reits) remains strong.

An increasing number of reits, which aggregate property rental returns under a single investment umbrella, are being set up by finance houses eager to capitalise on the government's failure.

Last month, French investment bank SG Securities launched the Real Estate Guaranteed Fund, Hong Kong's first reit-based guaranteed fund for retail investors.

On Tuesday, French fund house Credit Agricole Asset Management (CAAM) launched its Asian Reits Guaranteed Fund.

SG's strategy covers all markets with publicly listed reits, both in the United States and Europe, where this type of instrument has been available for many years, and relative newcomers such as Singapore and Japan.

CAAM's reit fund, in contrast, invests only in the latter.

There is also a huge discrepancy in how coupons in the two funds are calculated and distributed, a factor that can determine the underlying return and risk relationship in the funds

The SG fund guarantees a total coupon rate of 12 per cent over four years and nine months. Half of the coupon will be distributed at the end of the first year and the other half at the end of the second.

It uses the traditional "return calculation mechanism" that locks in profits every six months, a popular method used in most hedge funds that does not leave much room for gains other than the guaranteed portion.

CAAM is more innovative, if not aggressive, in its fund structure. First, concentrating on emerging reit markets such as Singapore and Japan means that the fund is in a better position to capture capital appreciation.

Another key difference is CAAM's "pass-through mechanism", which means that the fund's upside will depend on the level of rental income the underlying properties receive, a potentially lucrative but risky investing mechanism exposing the investor directly to the vagaries of the property market.

CAAM's fund offers a 9 per cent guaranteed return with a six-year tenure.

Andrew Au Siu-fai, a vice-president of structured products at SG, said its fund catered to investors who would be content with guaranteed annual returns of 2 per cent to 3 per cent and low upside potential.

"To put it simply, our new fund is in principle the same as our past equity-based guaranteed funds," Mr Au said.

"The only major difference is that it is based on reits, still a relatively novel investment vehicle to Hong Kong people.

"We expect ours to be more welcomed by conservative investors than that from our competitors."

SFC just being cautious?

On a separate note, it appears that the two fund houses have had very different experiences applying for regulatory approval from the Securities and Futures Commission for the reit funds.

At the company's fund-launching press conference this week, Dickson Cheung, the managing director and head of equity derivatives of Asia at Calyon, Credit Agricole's investment banking arm, told reporters it had taken the company "an unusually large amount of work and time" to obtain regulatory approval for its latest product.

While he did not specify, Mr Cheung said Calyon had filed twice as many supporting documents to the regulators as it had in other guaranteed-fund applications.

In contrast, Mr Au said SG's experience was pretty much business as usual, and that he had sensed "absolutely no difference" in the assessment process.

An SFC spokesman said the commission would not comment on individual cases.

An investment bank being picked on by the SFC? Money Week suspects that it was more likely a case of different expectations. After all, reits are still new to Hong Kong investors and we cannot blame the SFC for being a bit cautious.

China Glass aims for $207m IPO to fund production boost
Carol Chan, Hong Kong Standard
June 11, 2005

China Glass Holdings, which is raising up to HK$207 million through an initial public offering, plans to use 93.5 percent of proceeds to add a production line to boost annual capacity by two-thirds, said the company and fund managers.

China Glass, which has an annual production capacity of 748,000 tonnes hopes the new line will add a further 548,000 tonnes.

It also plans to upgrade an existing line next year to make ultra-thin glass of 2 millimeters or less for the automotive and electronics industries.

The firm, which makes glass for buildings and cars, aims to sell 90 million new shares at between HK$1.50 and HK$2.30 each, or 8.83 to 13.54 times its 2004 earnings of 65 million yuan (HK$61.14 million). Bigger mainland rival Zhejiang Glass trades at 5.9 times 2004 earnings.

"The price is not attractive. If the price is set 10 times earnings or below, it will be acceptable," said Charles Chu, senior investment services manager of Pegasus Fund Managers.

Chu is also concerned the firm's earnings may be affected by the central government's austerity measures to curb property speculation and overinvestment in the auto industries.

Still, China Glass has bagged London-listed Pilkington, the world's biggest windshield maker, as an investor, which will buy about 40 percent of the shares, or a 9.9 percent stake, for up to HK$83 million.

To sweeten its offer China Glass plans to pay about 30 percent of profits this year as dividends to shareholders.

The offer is open for retail subscription from Monday to Thursday, with the price to be fixed Friday. The shares are expected to start trading from June 23.

Wednesday June 15, 8:14 PM
World's biggest IPO this year has lackluster debut on Hong Kong market

China Shenhua Energy Co. raised nearly US$3 billion Wednesday in the world's biggest initial public offering this year _ but the coal company's stock made a lackluster debut on the Hong Kong stock exchange.

The stock closed at HK$7.30 (US$0.94), 2.7 percent lower than its initial IPO price of HK$7.50 (US$0.96). It was the day's most actively traded stock on turnover of HK$2.43 billion (US$312 million).

The blue-chip Hang Seng Index rose 0.1 percent to 13,914.30.

Analysts had been expecting a weak debut for China's largest coal producer. But some still rate the stock a long-term buy based on its dominant position in the mainland's booming energy market and attractive valuation.

Shenhua Energy sold 3.06 billion shares to raise US$2.95 billion. The retail tranche of its IPO was about 16 times covered, and the institutional leg four times subscribed. The sale was managed by Merrill Lynch & Co., Deutsche Bank AG and China International Corp.

"We are very happy with the subscription," Shenhua's Chairman Chen Diting told reporters at the company's listing ceremony.

Some 55 percent of the proceeds from the IPO will be used to fund the company capital expenditure plan.

Shenhua Energy's IPO has been dogged by concerns that it is overpriced and being sold at the top of China's coal price cycle.

Some fund managers were reluctant buyers of the IPO, fearing that if they didn't take some of the stock they would be excluded from future, more attractive offerings.

"People just don't want it," said Andrew Clarke, sales director at Kim Eng Securities.

Market participants said many investors who subscribed to Shenhua Energy's IPO, sensing that a fast profit wasn't to be made on the first day of trading, dumped the stock to free up cash to subscribe to the IPO of Bank of Communications, or BoCom, which closes Thursday.

"People are going into the BoCom offering," said Geoff Galbraith, an institutional sales trader at Tai Fook Securities.

But analysts Aaron Zhang and Frank Zhao of KGI Securities said sellers may be missing out on possible longer-term upside, and value Shenhua Energy at HK$9.50 (US$1.22; €1.01). Both argue that the stock in the long-term will clearly benefit from booming China's thirst for energy.

The coal producer had earlier abandoned plans to become the first mainland Chinese company to simultaneously list shares on the Shanghai and Hong Kong bourses, due to weak market conditions.

Chen said the company isn't looking to revive plans to list in mainland China within the next six months.

Shenhua Energy operates 21 mines, mainly in western and northern China. Last year, the company produced about 5 percent of China's total raw coal output.

Chen said he believes Shenhua's integrated coal business - covering mining and transport - is unique in the industry and would pave the way for strong growth.

Shenhua Energy is one of four major Chinese companies seeking to raise as much as US$8 billion from listings in Hong Kong over the next few months.

The others are Bank of Communications, one of the mainland's biggest lenders; China Cosco Holdings Ltd., a newly formed unit of China's largest shipping company China Ocean Shipping (Group) Co.; and China Minsheng Banking Corp., one of China's most prominent private banks.

Minsheng delays IPO to avoid clash with rivals
Elliot Wilson, Hong Kong Standard
June 16, 2005

Directors at China Minsheng Bank delayed the company's US$800 million (HK$6.24 billion) Hong Kong initial public offering until September at the earliest on concern the current flood of far bigger offers will blunt investor interest in its shares, sources close to the deal said.

Minsheng "didn't want to go head-to-head'' with US$6.5 billion worth of stock sales from China Shenhua Energy, China COSCO Holdings and Bank of Communications, one banking source said.

"It is a decision based on market conditions, there are no structural issues,'' he said. "It will probably go ahead in September.''

Pre-marketing of no more than 1.34 billion Minsheng shares, which had been expected to start Monday, was canceled last Friday after bank directors decided at a board meeting to shelve the stock sale until after the summer break.

Officials at the three banks underwriting Minsheng's IPO - Citigroup, Deutsche Bank and Goldman Sachs - declined to comment.

Minsheng's initial offering has been dogged by controversy almost from the beginning. Last February, Shanghai-listed Minsheng's Hong Kong IPO was thrown into doubt when a former shareholder alleged a meeting held to approve the bank's SAR listing had been faked.

Last summer, an "independent'' internal investigation cleared the bank of forging Shenzhen businessman Qiu Yingxin's signature at a meeting to approve the listing.

Qiu alleged he had been cheated out of 60 million shares and was in police custody when he was supposed to have put pen to paper.

Then in December, after months of foot-dragging by shareholders, Minsheng's board of directors finally voted to delay the sale by up to a year following squabbles over the valuation of H shares and a slump in the value of the bank's A shares trading in Shanghai.

In addition to avoiding going head-to-head with BoCom and other bigger rivals for investor money, the company wants to do its best to ensure that its Hong Kong offering price is not set too far below its share price in Shanghai. Sources said Minsheng's shareholders would want to see its H shares valued at a discount of no more than 25 percent to the A-share price.

Minsheng's A shares closed at 4.80 yuan per share Wednesday, down nearly 2 percent on the day but still up 5.9 percent this year, pricing the bank at 2.35 times its book value. That would require Minsheng to price its H shares at no less than 1.76 times forward 2005 book value - a level analysts say would be just about achievable.

Mainland investors worry that too low a price in Hong Kong will cause their A shares to fall, though precedent provides little clear indication whether this would happen.

The only other already listed mainland outfit to sell shares in the SAR, telecoms company ZTE, saw its A shares slip last December after its Hong Kong IPO before rallying strongly in the first three months.

Louis Wong, director at Phillip Securities, reckons ``BoCom's IPO will help Minsheng - they will outperform BoCom. Minsheng is a healthier bank and more appealing.''

Wong questioned the sense of postponing Minsheng's stock sale, given local and foreign investors' clear demand for shares in BoCom, the first mainland banking institution to sell stock overseas.

"Minsheng may want to delay its listing until September to get a better price, but I doubt they will achieve this,'' Wong said.

Banking sources said Minsheng would hope to get at least US$900 million from its listing if markets open strong in September after the summer break. Analysts said Minsheng, though a smaller bank than BoCom, which is being marketed at a 2005 book value of 1.37 to 1.79 times, has a far healthier balance sheet.

Founded in 1996 by former Red Guard Liu Yonghao, Minsheng's loan book has expanded 75 percent annually over the past five years, while BoCom's has grown at a more sedate 20 percent, figures from the People's Bank of China show.

Minsheng's bad loan ratio is also just 1.31 percent, the lowest level in the mainland, compared to 2.9 percent at BoCom.

Returns on equity and assets are also better at Minsheng - net return on equity at the private bank was 15.79 percent, compared to 4.5 percent at the state bank.

Kenford says HK IPO fully covered, trading begins June 16

HONG KONG, June 13 (Reuters) - Hong Kong's Kenford Group Holdings Ltd. said on Monday its initial public offering of shares had been fully subscribed and dealing in the shares will begin on Thursday.

Kenford said its public offering of 10 million shares for retail investors was 3.5 times covered and a placing of 90 million shares was fully subscribed.

The company, which makes hair dryers, had relaunched its offering of 100 million shares at a lower price of HK$0.55 each, attaching one warrant for every four shares subscribed.

Last month, Kenford said its IPO would not proceed because the company, bookrunner and lead manager failed to agree on a final offer price in "volatile market sentiment and interest rate environment".

Interest in initial public offerings has been largely lacklustre recently amid weak equity markets and a poor track record for offerings after their debuts.

The company initially planned to raise up to HK$85 million (US$10.9 million) by issuing 100 million shares at an indicative price between HK$0.65 and HK$0.85 each.

(US$1=HK$7.8)

China's Shimao Group postpones property asset IPO in Hong Kong - report
13 June 2005
Xinhua

BEIJING (XFN-ASIA) - Property developer Shimao Group postponed an initial public offering for some of its mainland property assets in Hong Kong, citing government measures to cool the overheated property sector and the weak performance of capital markets, the China Business Post reported.

Citing Xu Shitan, executive director of Shimao China Holdings Ltd (HK 0649), one of the group's listed arms, the newspaper said listing for the group's property assets "cannot be expected within this year."

No further details were provided.

State media reported earlier that Shimao Group planned to raise two bln hkd from the listing, which was expected to take place in May.

The assets to be injected into the new listed company included the group's stakes in Shimao Lakeside Garden, a housing project located in Shanghai's Pudong district, and four new hotels that are now under construction.

The four hotels, one in Nanjing and the other three in Shanghai, have a total investment of over 10 bln yuan. Construction of the hotels will be completed within this year.

Shimao Group already has two listed subsidiaries -- Shanghai Shimao Co Ltd (SH A 600823) and Shimao China Holdings Ltd (HK 0649).

(1 usd = 8.3 yuan; 7.8 hkd)

China's Bank of Communications to list in Hong Kong on June 23

BEIJING, June 13 (AFP) - China's Bank of Communications, the country's fifth-largest commercial lender, plans to list in Hong Kong on June 23 after launching an initial public offering Monday.

The Shanghai-based bank, the first in China to list internationally, said it was seeking to raise up to 1.6 billion dollars.

It was selling 5.9 billion shares, or 12.38 percent of its enlarged issued share capital, at 1.95-2.55 Hong Kong dollars (25-33 US cents) each to institutional and retail investors.

The subscription offers ends on June 16 with the bank to list on the main board of the Hong Kong Exchange on June 23.

The lender could raise the size of the issue by 15 percent to 6.73 billion shares for over-allotments, it said at a briefing to launch the IPO.

A market source said the share sale's institutional tranche, which accounts for 95 percent of the total shares offered, has been oversubscribed.

Expectations are that demand for the retail portion of the lender's offering, which is five percent of the number of shares offered, will also be strong, the source said.

The net proceeds will be used to strengthen the company's capital base.

Global banking giant HSBC, owner of a 19.9 percent stake in the mainland lender, will subscribe for 1.16 billion additional shares to maintain its current shareholding in the company.

Following Bank of Communications, China Construction Bank and China Minsheng Banking Corp. are slated to go public in Hong Kong this year with the race on to restructure before foreign banks enter the Chinese market in 2006.

Chinese regulators hope that pushing state-owned banks to go public will also bring greater transparency to a sector riven with bad debt and bad practice.

HK Dlr Mkts Late: Hibors Rise On Fund Demand For IPOs
13 June 2005

HONG KONG (Dow Jones)--Hong Kong interbank offered rates rose Monday as local liquidity was squeezed by the demand for funds for subscriptions to initial public offerings on the local bourse.

The one-month Hong Kong interbank offered rate was quoted at 3.26%, against 3.24% Friday. The 12-month Hibor was quoted at 3.47%, compared with 3.40% previously.

The retail offering for the US$1.9 billion Bank of Communications IPO commenced Monday. The fifth largest mainland lender is expected to list on the Hong Kong stock exchange on June 23.

This will be followed by the IPO of COSCO Holdings. The mainland integrated container shipping service provider is seeking to raise US$1.65 billion in an IPO ahead of a listing on June 30.

Discounts on U.S. dollar/Hong Kong dollar forwards were steady, given the lack of major fund flows and stable U.S. dollar/yuan nondeliverable forwards.

The discount on the one-year contract was quoted at 295-270 points, compared with 300-280 points Friday.

Traders believe the fluctuation of forwards will remain limited in the near term in the absence of developments on China's foreign exchange policy.

Despite broad gains of the U.S. dollar against major currencies, the local dollar strengthened a bit due to foreign interest in coming IPOs.

The U.S. dollar was quoted at HK$7.7784, compared with HK$7.7803 Friday.

Traders expect the Hong Kong dollar to remain strong in the near term, but its upside is likely to be capped near its recent high around HK$7.7750.

Yields on Exchange Fund notes rose, tracking U.S. Treasuries.

The two-year EF note yield rose to 3.07% from 3.02% Friday. The 10-year EF note yield was quoted at 3.57%, compared with 3.52% previously.

Chart Of Current Market Levels

Latest Late Friday
Overnight Hibor 3.00% 2.80%
1-month Hibor 3.26% 3.24%
3-month Hibor 3.29% 3.27%
1-year Hibor 3.47% 3.40%
USD/HKD Spot HK$7.7784 HK$7.7803
6-month USD/HKD Forward -92 to -82 -100 to -90
1-year USD/HKD Forward -295 to -270 -300 to -280
EF Note 3.51% Dec 2014 3.57% 3.52%

BoCom offering at least six times oversubscribed
Lee Yuk-kei and Wong Ka-chun
14 June 2005
Hong Kong Standard

The HK$14.8 billion initial share offering of Bank of Communications is a hit with both retail and institutional investors, sources close to the arrangers of the issue said.

As of Monday evening, the institutional portion of the offer was already at least six times oversubscribed, the sources said.

The offer's promotional roadshow has reached its last stop, New York, after covering Hong Kong, Singapore and London. Thursday is the closing day for both the retail and institutional portions of the offer.

A member of BoCom's offering syndicate said arrangers would concentrate on pension funds and endowment funds during the New York leg.

On the retail side, brokers and banks are offering investors cheaper margin financing than usual.

Brokers said five of the securities houses most actively promoting the offer raked in subscriptions of about HK$3.5 billion on Monday, the first day. Philip Securities led the pack with about HK$1.5 billion worth of margin finance orders. It advertised the lowest interest rate, 3.95 percent.

Sources said Cash Securities received about HK$800 million, while Sun Hung Kai Securities and Core Pacific-Yamaichi took in about HK$500 million each. Prudential Securities collected about HK$200 million.

The lowest rates of all were offered by Hang Seng Bank. An investor who borrows, for example, HK$1 million from the bank via the Internet will pay HK$688 _ an effective interest rate, assuming repayment in seven days, of about 3.58 percent.

Brokers said BoCom was arousing far more enthusiasm among investors than coal giant China Shenhua Energy.

"Clients were lukewarm to the Shenhua IPO _ we got only about HK$20 million in margin financing orders in the first day, a stark contrast to BoCom," Stephen Tse of Philip Securities said.

"We discouraged clients from betting heavily on Shenhua but recommended BoCom because Shenhua's pricing was too high and BoCom's was more reasonable."

Shenhua Energy sold 3.064 billion shares at HK$7.50 to raise HK$23 billion.

Lukewarm response from both retail and institutional investors caused it to price the issue near the bottom of its indicative HK$7.25 to HK$9.25 range. Shenhua's offer was oversubscribed about eight times by institutional investors and 16 times by retail investors.

Simon Lam of ChristFund Securities said many retail investors would be allocated fewer BoCom shares than they wanted because the bank set aside only 5 percent of the offering for the general public.

The strong demand for BoCom shares is expected to drive Hong Kong dollar interest rates higher.

Interbank rates rose after the stock market closed on Monday, and Tse predicted that Philip Securities' margin interest rate would surge to 4.1 or 4.2 percent from 3.95 percent, dampening demand for margin financing.

Hungry for capital, China plans parade of big IPOs, including US$3 billion offering
By HELEN LUK
14 June 2005

HONG KONG (AP) - China is making a splash in financial markets with the world's biggest initial public offering this year: On Wednesday, its largest coal producer, China Shenhua Energy Co., hopes to raise nearly US$3 billion (€2.5 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 (€4.15 billion).

Investor demand seems strong, particularly in Bank of Communications, China's fifth largest lender and the first bank to list outside the mainland. 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 (€1.6 billion), and its initial share price is expected to be between HK$1.95 (25 U.S. cents) and HK$2.55 (30 U.S. cents) a share. In sheer size, that would surpass last year's biggest Chinese IPO, a US$1.85 billion (€1.5 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, an economist at Morgan Stanley in Hong Kong.

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., the mainland's most prominent private bank, and container shipping giant China Cosco Holdings.

There are two smaller Chinese stock markets in the mainland -- 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.

In order to list in Hong Kong, mainland companies must satisfy regulators and meet standards on corporate transparency. But even so, problems stemming from looser standards on the mainland often surface.

Chinese banks could prove risky because of their many loans to the property sector, which is slumping after booming for years.

"Fund managers are worried about potential increase in bad debts," Xie said.

The risks of investing in companies linked to China were driven home by the near-backruptcy of China Aviation Oil (Singapore) Corp. The company, China's main jet fuel supplier, revealed late last year that it had lost more than US$500 million (€400 million) by placing bets on the future price of oil.

Investor confidence in Bank of Communications was buoyed somewhat when London-based HSBC Holdings PLC bought a 20 percent stake in the bank last August and appointed the head of its China business as vice president at the bank.

Shenhua Energy, however, is entirely state-owned. It operates 21 mines in China and produced about 5 percent of the country's total raw coal output last year.

The initial price of Shenhua shares -- HK$7.50 (96 U.S. cents) each -- is at the low end of expectations, probably prompted by concerns that Chinese coal prices may peak this year and general worries about the mediocre performance of Chinese stocks this year.

The so-called H-share Index, which tracks mainland Chinese companies listed in Hong Kong, has fallen about 1 percent this year to 4,716.

Still, there's plenty of interest in the IPOs among Hong Kong-based investors.

"There aren't many attractive stocks to buy in the market at the moment," said Lau. "Comparatively, the downside of buying new stocks is relatively limited. That's why many people are interested."

Shenhua's low price -- and the opportunity to tap into China's growth -- makes it appealing, says Liu Yang, a fund manager at Atlantis Investment Management Hong Kong.

"I think it is a better investment than Bank of Communications," Liu said. "You have more chance to make money because there are more bank IPOs coming and you have many, many choices."

Before the year is over, China plans an even larger IPO -- China Construction Bank's US$5 billion offering.

That would surpass last year's biggest IPO anywhere: telecommunications company Belgacom SA, which raised $4.4 billion (3.5 billion euros) on the Euronext exchange.

INTERVIEW-Top China film studio plans overseas listing
By Doug Young

SHANGHAI, June 14 (Reuters) - Hengdian Group, China's biggest film studio, is exploring an overseas listing worth about $100 million, which could make make it the nation's first such company to list overseas, its chairman said on Tuesday.

The offering, most likely in Hong Kong or the United States, would involve Hengdian's filmed entertainment unit, said Chairman Xu Yongan, who compares his company to names like Disney and General Electric's Universal unit.

The Hengdian entertainment unit includes both movie and TV production and boasts a credit list that includes the Oscar-nominated film "Hero" by director Zhang Yimou. The listed vehicle would include movie and TV production facilities, as well as distribution operations and Hengdian-owned movie theatres.

Hengdian made 72 movies and TV series last year and expects that to jump to over 100 this year. It also operates electronics and pharmaceuticals divisions, but has seen the biggest growth recently in the filmed entertainment business founded in the mid-1990s, Xu said.

"We're thinking that this part of the company may go public," Xu told Reuters in an interview in Shanghai. "But I can't say if it will be by year-end."

An overseas listing, a move that Beijing is encouraging many companies to make, would give Hengdian access to foreign capital and market discipline.

Earlier this year, a source familiar with the situation told Reuters that Hengdian was planning a Hong Kong IPO late this year worth up to $300 million.

Last year, the company formed a movie-making venture with Time Warner's Warner Bros. unit, an industry first after Beijing relaxed rules governing such ventures.

It is also negotiating a $15 million post-production joint venture with Hong Kong's Mandarin Entertainment (Holdings) Ltd. , Xu said.

GROWTH SPURT

Hengdian's entertainment division, which aspires to be the "Hollywood of the East", generated a relatively modest 300 million yuan ($36 million) in revenue last year, far less than the 8.2 billion yuan for its electronics business and 5.5 billion yuan for its pharmaceuticals.

But Xu said the entertainment unit was growing much faster than the other two more mature areas. "The film portion is a very important investment for us. I estimate that this year that portion will grow 30-40 percent. That shouldn't be a problem."

Xu said the Warner Bros. joint venture, with about $8 million in registered capital, was expected to start shooting its first film this summer and could make 2-3 movies this year with budgets in the $1.5 million to $2 million range. The venture has an eventual target of making about 10 movies a year, he added.

Many foreign media companies have looked to China, with its 1.3 billion potential moviegoers, as the world's next major movie market. But strong restrictions on distribution and the import of foreign films, along with a lack of high-quality theatres, has kept the industry from developing faster.

Rampant piracy, which often sees new movies coming out on pirated DVDs just days after a theatrical release, has also put off moviemakers seeking to build their presence in the market.

Warner's venture with Hengdian would allow it to get around the import restrictions, but it would still face other issues.

China has also been reluctant to allow foreign participation in its media industries, in a nation where movies, books and newspapers were traditionally viewed more as propaganda tools than as entertainment.

The country has only recently opened the publishing and filming industries to certain types of joint ventures.

It has also allowed limited overseas listings for some domestic media, with Beijing Media Corp. Ltd. , publisher of the popular Beijing Youth Daily, raising $116 million in an IPO last year for its advertising and sales units.

Xu said that Chinese media companies still face tough scrutiny when listing overseas due to traditional concerns.

"The movie business is sensitive, but not as sensitive as the newspaper business," he said.

FACTBOX-Largest overseas IPOs by Chinese firms

HONG KONG, June 15 (Reuters) - Shares in China Shenhua Energy Co. Ltd., the country's top coal miner, began trading in Hong Kong on Wednesday after it raised $2.95 billion in the world's biggest IPO so far this year.

Below is a list of the biggest overseas IPOs by mainland Chinese companies:

Company Pricing date Size of IPO
China Unicom June 16, 2000 $5.25 bln
China Life Dec 11, 2003 $3.5 bln
China Shenhua Energy June 8, 2005 $2.95 bln
China Mobile Oct 16, 1997 $2.46 bln
PetroChina March 30, 2000 $1.96 bln
Ping An Insurance June 18, 2004 $1.84 bln
SMIC March 12, 2004 $1.8 bln
Sinopec Oct 12, 2000 $1.73 bln
China Telecom Nov 6, 2002 $1.52 bln
Air China Dec 9, 2004 $1.48 bln
CNOOC Ltd. Feb 21, 2001 $1.23 bln
China Netcom Nov 10, 2004 $1.13 bln

Sources: Dealogic, Reuters.

China's GST to raise up to $53 mln in HK listing-sources

HONG KONG, June 15 (Reuters) - GST Holdings Ltd., a privately-owned fire safety products maker in China, plans to raise US$44 million to $53 million in a Hong Kong listing, sources close to the deal said on Wednesday.

GST and its sponsor, Morgan Stanley , started a marketing roadshow on Tuesday, and aim for a trading debut later this month.

Morgan Stanley declined comment. The IPO will be the Wall Street giant's first in Hong Kong this year.

Last year, Morgan Stanley underwrote Hong Kong listings by Ping An Insurance , Mengniu Dairy , Tom Online , China Shipping Container Lines and Shanghai Forte Land Co. Ltd. , which together raised more than $3 billion.

Morgan Stanley is one of the underwriters for the expected $5 billion to $10 billion listing planned by China Construction Bank [CCB.UL] later this year or in 2006.

Beijing-based GST Holdings, which will trade under the stock symbol , is offering 200 million shares at HK$1.69-$2.09 each, or 9-11 times 2005 earnings.

It generated net earnings of $14.8 million in 2004, up 56 percent form $9.5 million in 2003, on revenues of $51.2 million and $38.1 million, respectively.

Net profit margins increased to 28.9 percent last year, from 25 percent in 2003.

Wireless firm set for HK$814m from IPO
Vincent Lam
21 June 2005
China Daily - Hong Kong Edition

SIM Technology Group, a Hong Kong-based wireless communications products maker, is set to raise up to HK$814 million in an initial public offering (IPO) from today to Friday in Hong Kong.

The mobile handset and wireless communications solution provider, which will float its stock on June 30, will offer a total of 375,000,000 shares with a price ranging between HK$1.68 and HK$2.17. Ninety per cent of the shares will be offered on placing and the remaining 10 per cent will be offered on retail tranche.

The capital raised will be invested in expanding research and development capabilities in next-generation mobile handsets and new chipset technologies and the establishment of a new design and development centre.

Among all the money raised, 37 per cent, or HK$220 million, will go on research and development of 3G handsets.

Executive Vice-President Simon Hei Wong said the company is fully geared for the launch of 3G services based on different 3G technologies on the mainland. Wong predicted that production would start by the second half of 2006.

Despite the fact that the market is crowded with a series of heavyweight IPOs such as Bank of Communications, China Shenhua Energy and China COSCO Holdings SIM Technology has the competitive spirit needed to win investors' hearts, said an analyst.

Leung Wai-pui, a strategist at Tai Fook Securities, said: "SIM Technology is not in a head-on competition in snatching funds from the market against China COSCO and other IPOs because of its unique technology background and small target of funds raised."

"Its offering may not be that appealing to retail investors but institutional investors may have greater interest thanks to the company's unique positioning in the sales of outsourced mobile technology and design."

According to the company's IPO document, the Wong family will hold 75 per cent of the company's stake after the listing but it is banned from selling shares in the company for at least one year.

The company secured several contracts from a number of well-known mainland handset companies such as Bird and ZTE in recent years.

Founded in 1986, the company designs, develops and manufactures handsets and liquid crystal display modules for mobile phones and global systems for mobile and general packet radio service modules.

China's Jolimark to raise 142.5 mln hkd in HK IPO seeks tie-up with Legend
20 June 2005
AFX Asia

HONG KONG (XFN-ASIA) - Jolimark Holdings Ltd, maker of dot matrix printers and invoice printers, said it hopes to raise 142.5 mln hkd through the sale of 125 mln company shares at a fixed price of 1.14 hkd per share.

The company opened its public offer in Hong Kong today, it said.

In its prospectus, Jolimark said Legend Holdings, parent of computer maker Lenovo Group, has subscribed to shares equivalent to a 2.16 pct stake in Jolimark.

The subscription was made through Legend's investment arm, Legend Capital Management Ltd.

Jolimark is Lenovo's client and is seeking to expand its cooperation with Legend Holdings in the areas of research and technology development.

Jolimark shares are expected to trade on the Hong Kong main board on June 29, with Kingsway as listing sponsor and coordinator.

China top-ranking IPO market in Asia Pacific last yr - Ernst & Young
21 June 2005
Xinhua Financial Network (XFN) News

BEIJING (XFN-ASIA) - China, including Hong Kong, was the top-ranking initial public offering (IPO) market in the Asia Pacific region last year, raising 16 bln usd in 182 public listings, Ernst & Young said in a global IPO report released today in Beijing.

The global financial services firm predicts China would remain a dominant force in IPOs this year but gave no detailed forecasts, saying only that transaction numbers and dollars raised would at least equal last years' totals.

"The number of IPO deals increased by 51 pct (in 2004), while the capital raised remains at the same level as 2003, and the pipeline stocks are going well in 2005 too," Conway Lee, general manager of China business development at Ernst & Young Beijing, said in a statement.

"We expect the market in mainland China will continue to dominate."

The report said that 2004 was an important turning point for IPO activity around the world, with a rise for the first time since 2000 in both the number of IPOs and the total capital they raised.

China not only topped the rankings in the Asia Pacific region last year, but was second among the global markets after the US.

Global IPO activity jumped sharply in 2004, recording about twice the number of transactions and more than double the dollars raised than the year before, the report said.

The 1,516 deals and 124 bln usd of capital raised in 2004 were the highest since 2000, with the Asia Pacific region continuing to drive activity.

"Continuing the trends of 2003, the bulk of last year's IPOs tell the story of established companies with strong cash flow and growing profits going to market to raise money for expansion," the report said.

And while 2005 has started more slowly than expected, global public listing activity "should remain strong over the medium term".

Report contributor Mark Pols from Piper Jaffray's China office wrote that many more Chinese companies are preparing to come to market.

"The backlog of potential IPOs for both the Hong Kong exchange as well as the US markets is probably bigger now than it's ever been," he wrote.

"I read a statistic the other day that companies were looking to raise 30 bln usd in the Hong Kong market this year alone. And in terms of venture-backed companies looking to go public in the US, the backlog of companies right now is probably two or three times what it was a year ago."

The report said the number of local Chinese companies listing outside the mainland increased last year.

Worldwide, of the 177 IPOs taking place in another country, 39 were Chinese companies taking their first steps into the international markets via Hong Kong or Singapore.

Ernst and Young's Lee told reporters that Hong Kong and the US should be the most popular offshore listing locations for Chinese companies in terms of capital in 2005.

Hong Kong and Singapore should dominate in terms of the number of Chinese firms coming to market, he said.

Piper Jaffray's Pol wrote in the report that US exchanges remain attractive to Chinese companies despite the introduction of the stringent Sarbanes Oxley Act, designed to protect investors.

"I know at least five companies that are thinking about an IPO and have said that the potential for shareholder litigation is a serious concern to them," he said.

"But I also know that every single one of them will still end up listing in the US."

Ernst & Young expects large state-owned enterprises to figure prominently among the Chinese companies that will make it to market this year.

Lee said listing activity would pick up towards the end of the year, but noted that Chinese stock markets would "have to go the way" of Sarbanes Oxley to instill investor confidence in new listings.

China's benchmark Shanghai Composite Index repeatedly hit eight-year-lows early this month, plagued by concerns about the quality of listed companies and a potential influx of formerly non-tradable state-owned shares onto the market.

Newspaper prepares $180m float
Carmen Chan
23 June 2005
South China Morning Post

Hong Kong Economic Times (Holding) is planning a $180 million stock-market listing this summer, sources said yesterday.

It will be the fifth listed Chinese print media firm on the main board. The others are Ming Pao Enterprise Corp, Next Media, Oriental Press Group and Sing Tao News Corp.

"The listing process has reached the last stage and will be announced to the market soon, if everything goes smoothly," one source said.

Executives at the newspaper company declined to comment.

Media stocks have fared well in recent months. Ming Pao has risen 28.16 per cent since the beginning of the year, closing at $1.82 yesterday. Next Media, which owns Apple Daily, has jumped 17.21 per cent to $3.575 since hitting a low of $3.05 on April 21.

Oriental Press, set to report its full-year results on June 28, has gained 14.13 per cent to reach $2.625.

Clement Wong, an analyst at SBI brokerage, said last year was a profitable one for the print media.

According to industry agency Carat's Asia Pacific Market Handbook 2005, total revenues for local newspapers last year rose 12.3 per cent to US$1.81 billion.

Nevertheless, Mr Wong said the outlook for newspapers generally was not exciting.

"Media is a sector whose performances are highly in line with the economic cycle, and Hong Kong's gross domestic product is expected to be stable for a while," he said.

Last year's growth was mainly due to the comparison with Sars-stricken 2003.

Mr Wong estimates the fair value for Hong Kong Economic Times at somewhere under 15 times its price-earnings ratio for next year, compared with 23 times for Next Media and 16 times for Oriental Press.Additional reporting by Frederick Yeung

Trail-blazing bank makes solid debut
First mainland commercial lender to list overseas rises 13pc
Carmen Chan and Bei Hu
24 June 2005
South China Morning Post

Bank of Communications (Bocom) had a solid trading debut yesterday, rising as much as 16 per cent at one stage, with the mainland lender vowing to strengthen its retail business over the next five years.

Shares of Bocom, the first mainland bank to list overseas, closed at $2.825, 13 per cent higher than its issue price of $2.50, after reaching a high of $2.90 in the morning.

Turnover was robust with $5.15 billion worth of shares changing hands, reflecting the massive interest in an offering whose retail tranche was 204 times subscribed.

"As the first mainland commercial bank to list in Hong Kong our stock performance is testimony to market recognition of our sound corporate governance, strong capital base, good asset quality and close partnership with HSBC," Bocom chairman Jiang Chaoliang said after the listing ceremony.

"In five years, we aim to generate more than 20 per cent of our revenue from retail banking."

At the end of last year, retail banking accounted for 10.1 per cent of revenue while corporate banking accounted for 63.3 per cent.

The mainland's fifth-largest bank, in which HSBC Holdings has a 20 per cent stake, has proved the hottest share float this year and the sixth most popular in terms of retail orders.

While analysts generally expected an upside of about 20 per cent yesterday, Alex Tang Yee-yuk, a research director at Core Pacific-Yamaichi International, said Bocom's debut was "reasonable" and "in line with market expectations".

However, Mr Tang did not expect any significant follow-up gains.

"Bocom is overvalued if the share price rises to above $3," he said, adding that the stock's close yesterday represented about 16 times the lender's price-earnings ratio while HSBC and BOC Hong Kong (Holdings) traded at only about 14 times.

HSBC and Goldman Sachs were joint global co-ordinators.

China Glass Holdings which also made its debut yesterday, rose 3.21 per cent to close at $2.25 on turnover of $38.5 million.

Jingkelong aims to tap $400m in IPO
Carol Chan, Hong Kong Standard
June 27, 2005

Beijing Jingkelong Supermarket Chain Group, the mainland's 27th largest chain retailer, aims to raise about HK$300 million to HK$400 million in a Hong Kong initial public offering by the end of this year to add more stores and improve its logistics and computer systems, sources said.

Jingkelong has appointed Singapore-based DBS Asia Capital as sponsor to arrange the share sale, and has submitted the listing application to the China Securities Regulatory Commission, people close to the deal said.

Founded in 1994, Jingkelong had 140 outlets including supermarkets, convenience stores and drug stores in Beijing at the end of last year - generating 5.24 billion yuan (HK$4.91 billion) of sales, up 12.7 percent from 2003 - making it the 27th largest retail chain in China, according to the statistics from Department of Commercial Reform and Development, Ministry of Commerce.

Jingkelong aims to increase its retail outlets to 300 and annual turnover to 10 billion yuan the next three to five years, according to its Web site.

Investment bankers said mainland retail and consumer plays have been favorites among institutional investors recently and expect Jingkelong "will not be difficult to sell."

Several offerings from that sector, such as vintner Dynasty Fine Wines Group, sportswear retailer Li Ning and Mengniu Dairy, have been heavily oversubscribed on bets that consumer spending in China will continue to soar.

State Statistical Bureau data show that retail sales rose 13.3 percent to 5.4 trillion yuan last year as per capita disposable income increased 7.7 percent to 9,422 yuan per year. Sales at the top 30 retail chains in mainland surged 32.9 percent to 384.56 billion yuan last year.

Besides, mainland retailers are also trading at a good prices. For example, the mainland's largest retail chain, Lianhua Supermarket, is trading at 26 times earnings, while Jingkelong's closest rival, Wumart Stores, the GEM-board listed retailer, is trading at 33 times earnings.

Wumart is the bellwether supermarket chain in Beijing. It had 468 outlets, including nine hypermarkets, 46 supermarkets, 405 convenience stores and eight drug stores at the end of March.

Analysts say Jingkelong needs to have some discount with Lianhua and Wumart to lure investors because of its relatively small scale. Some say it will be attractive at about 10 to 15 times earnings.

Still, another banker pointed out that Jingkelong will probably compete for funds with another retail stock, Parkson China, the Malaysian conglomerate Lion Group's mainland department store chain business, which also plans a share sale for the fourth quarter this year.

The Lion Group has selected BNP Paribas Peregrine as sole arranger of Parkson China's US$100 million (HK$780 million) share offering, according to earlier media reports.

Chain retailers like Trust-Mark, Yongle and Home World also say they are planning listings.

Senyuan IPO hopes to raise HK$90m
Mark Lee, Hong Kong Standard
June 29, 2005

Senyuan International, a mainland manufacturer of switchgears for the electricity industry, is raising up to HK$90 million in an initial public offering of shares to fund new product development and repay debt.

Chairman Patrick Tsang said he expected sales of 12-kilovolt circuit breakers to increase 23 percent to 18,000 units this year.

The product accounted for 70 percent of the group's 299 million yuan (HK$281 million) turnover last year, though Tsang said average selling prices dropped 1.5 percent to about 15,000 yuan, narrowing the gross profit margin to 25.4 percent from 26.9 percent.

Senyuan plans to use 69 percent of the IPO proceeds on research and development to aid product diversification. The group plans to launch 40.5-kilovolt circuit breakers and more advanced embedded pole products, Tsang said.

He said Senyuan's annual production capacity is 25,000 units, and full utilization should be reached in two years.

Last October, Senyuan moved into new production facilities, which cost 65 million yuan. The construction costs, mainly financed by bank borrowings, pushed up its end-of-year gearing ratio to 33 percent from 23.8 percent. Of the IPO proceeds, HK$12 million would be used to repay debt.

Senyuan is selling 76.25 million new shares, representing 25 percent of its enlarged share capital, at HK$1.18 each. The shares were priced in the middle of the indicative range offered to institutional investors, said joint sponsors Quam Capital.

"The institutional tranche has been fully covered, with demand coming mainly from overseas investors familiar with the electricity industry,'' said Quam deputy chairman Kenneth Lam.

Quam and Altus Capital are joint sponsors of the share sale.

Senyuan was priced at 9.1 times last year's net profit of 42.1 million yuan. That compares with price-earnings multiples of 15.2 for power equipment maker Shanghai Electric. Japan-listed Seiko Electric currently trades at 28 times last years earnings.

"The lower valuation for Senyuan reflects the softer market conditions in Hong Kong,'' Lam said.

Third big Chinese IPO in Hong Kong this month to be lackluster, analysts say
28 June 2005

HONG KONG (AP) - China COSCO Holdings Ltd., a unit of China's largest shipping firm, is expected to have a lackluster debut on the Hong Kong stock exchange Thursday, due to a weak outlook for global shipping and the lukewarm investor response to its $1.22 billion initial public offering, analysts said.

Many analysts expect China COSCO's shares to fall around 6 percent from their IPO price of HK$4.25 (54 cents), with the most bearish estimates predicting to a 10 percent drop.

"China COSCO's stock will go down because of the lack of subscription demand from investors," said Steven Leung, sales director of UOB-Kay Hian Securities.

Poor subscription was due largely to concerns over the impact of a peaking global shipping cycle on China COSCO's earnings. The firm is a unit of China Ocean Shipping (Group) Co.

The IPO wraps up a string of three $1 billion-plus mainland China offerings in Hong Kong this month. The others were Bank of Communications Ltd., China's fifth-largest lender, and coal producer China Shenhua Energy Co.

Some analysts also said the initial stock price was too expensive.

"The shipping part of China COSCO isn't cheap compared with its peers," said Gideon Lo, an analyst at DBS Vickers. He said after factoring out the company's 52 percent stake in already-listed ports operator COSCO Pacific Ltd., its other principal container shipping assets are trading at 5.5 times expected 2005 earnings.

That is markedly higher compared to Hong Kong-listed shippers Orient Overseas International Ltd. and China Shipping Container Lines Co., which are both trading around 3.5 times 2005 projected earnings.

The main obstacle for China COSCO and its peers is the looming oversupply of container shipping capacity, as a softer global economy leads to lower demand.

Against that backdrop and the availability of cheaper shipping plays, Lo of DBS said China COSCO's stock may come off by as much as 20 percent by the end of the year.

Investors will also be mindful of the company's own lackluster earnings forecast. In its IPO prospectus, it projected net profit of at least 4.15 billion yuan ($500,000) in 2005, virtually unchanged from the previous year.

Cheung Kong plans Hong Kong REIT
By Linus Chua and Bernard Lo Bloomberg News
THURSDAY, JUNE 30, 2005

Cheung Kong Holdings plans to sell shares in its first Hong Kong real estate trust, reviving the city's bid to be a center for property fund investment, a company official said Wednesday.

Cheung Kong, which has two trusts traded in Singapore, decided that its next one would be listed in Hong Kong after reviewing guidelines released this month by regulators, according to the company's executive director, Justin Chiu.

Hong Kong has no property trusts on its exchange, since legal action last year derailed what would have been the world's biggest initial public offering of a property trust. The market value in Sydney, Singapore and Tokyo of real estate trusts - which own buildings and use rental income to pay dividends - exceeds $75 billion, according to Henderson Global Investors.

"With the revised rules in Hong Kong, the modest corporate tax rate that exists, there's still room for the REIT market to develop," Chris Reilly, a fund manager at Henderson Global, said. "We expect to see overseas assets such as China assets being listed in Hong Kong."

Hong Kong suffered a setback to its plans to develop the market when the government's planned listing of a $2.7 billion trust was challenged in court by a public housing tenant.

To attract listings, the city this month relaxed its rules to allow property trusts to invest in real estate overseas and to borrow as much as 45 percent of the value of the property they hold.

"We have carefully studied the guidelines and we find it very encouraging, and there are good opportunities to list our REITs in Hong Kong," Chiu said, declining to give details of the trust. The guidelines "will help grow the REIT market in Hong Kong."

Publicly traded real estate companies in Hong Kong have about $100 billion of assets, according to the Securities and Futures Commission.

Still, of the four Asia-Pacific markets with property trusts, Hong Kong would be the only one not offering tax breaks for REITs, said Michael Smith at UBS.

"The major constraint of the Hong Kong market is the lack of tax transparency," said Smith, head of Asia real estate at the lender's investment banking unit. Without any tax benefit, "it's very hard for an owner of real estate to elect to put his real estate in a REIT form and have to comply with all the restriction in a REIT code."

Tax breaks for property trusts would be a "red herring," Alexa Lam, the executive director of Hong Kong's Securities and Futures Commission, said on June 27. Tax breaks would not benefit REITs from China and other markets that might be traded in Hong Kong because they would have to comply with domestic tax laws, she said.

Wednesday June 29, 5:37 PM
HK Jolimark Makes Weak Listing Debut In Hong Kong

HONG KONG (Dow Jones)--Jolimark Holdings Ltd. (2028.HK) made a weak debut on the Hong Kong Stock Exchange Wednesday, with its shares closing unchanged from its HK$1.14 initial public offer price. Analysts said this reflected the lackluster investor demand for the Chinese office printer maker's IPO.

Jolimark's shares hit an intraday high of HK$1.15 before closing at the IPO price. The IPO was priced in the middle of the HK$1.11 to HK$1.17 indicative range. About 9.6 million Jolimark shares worth HK$11 million changed hands Wednesday.

Traders said what buying there was in the company was dominated by listing sponsor Kingsway.

The main Hang Seng Index closed down 0.1% at 14,277.28 Wednesday.

Jolimark raised HK$142.5 million from its IPO.

A trader with a local brokerage said that although Jolimark has "sound fundamentals" it is in a low-margin business. The company has exclusive contracts to produce printers for China's tax department, which is going through a fresh systems upgrade this year.

Investor response to some recent Hong Kong IPOs has been cool, a factor which further weighed on Jolimark's debut.

The retail tranche of Jolimark's offer, which comprised 10% of the IPO, was just over half covered. Jolimark offered 125 million shares, representing 25% of its enlarged issued share capital.

Proceeds of the IPO will go toward various projects, including research and development and strengthening sales and distribution networks.

Jiangmen-based Jolimark's net profit totaled HK$86.2 million in 2004, up from HK$77.5 million the previous year.

Regulator seeks tighter role for listing sponsors
SFC calls on senior bankers to take more responsibility over new offerings
Kelvin Wong
30 June 2005
South China Morning Post

The Securities and Futures Commission wants tighter regulations for listing sponsors that will place more responsibility on senior management at investment banks.

In a consultation paper containing major rule changes, the market regulator has proposed that each sponsoring firm should have at least two principal investment bankers and also file annual self-assessments to the commission.

A principal must have at least five years of corporate finance experience and have played a leading role in at least two initial public offerings in the previous five years.

Under the proposed changes, they will be individually responsible for the comprehensiveness and accuracy of the due diligence process on listing firms.

"We can't accept those working on an [initial public offering] to say that they don't know who's responsible for the due diligence when something goes wrong," SFC executive director Alexa Lam said.

The proposals require each deal to be handled by an individual team led by at least one principal banker but set no other guidelines on resources and manpower firms must deploy on each deal.

"Ultimately, they will be the ones who are responsible for the consequences if they made any bad judgment," said Mrs Lam, who expected most of the 70 sponsor firms with listing track records in the past five years to make a "smooth transition" to the new rules.

The corporate finance industry generally welcomed the plan to have more experienced bankers take responsibility for company listings.

One share listing expert at a large US investment bank said the new requirement would encourage companies that delegated large parts of due diligence work to external law firms to become more involved.

The consultation is the second part of a two-stage process launched by the commission and the stock exchange to raise standards of advisory work provided by sponsors.

Calls for tougher regulations have come amid several high-profile scandals involving listed companies such as Euro-Asia Agricultural (Holdings) and AKuP International Holdings in the past few years.

The SFC also proposed that firms buy insurance to partly cover investor losses in cases of similar debacles, a common practice in the US because of the threat of class actions.

"[Having insurance coverage] is a general trend among other well-regulated industries and we believe we should do the same," Mrs Lam said. "But we will see what the market response is before making a decision."

An investment banker at a small firm that specialises in arranging share offerings for small mainland companies said the insurance requirement would hurt the competitiveness of smaller outfits.

"It can have a big effect on us because our profit margins are generally smaller than [those of] the big firms," she said.

The new rules could come into effect in about 14 months.

Tuesday July 5, 6:45 PM
Hong Kong court hears final appeal in lawsuit that derailed world's biggest property trust

Hong Kong's Court of Final Appeal began hearing arguments Tuesday in a lawsuit filed by an elderly woman who derailed what would have been the world's largest property trust.

The retiree, Lo Siu-lan, challenged the US$3 billion property trust, saying the listing violated the housing code. The deal involved 151 government-owned shopping centers and 79,000 parking spaces.

Lo, 67, lost her initial lawsuit, but she appealed and the deal was put on hold last December just before it was to list on Hong Kong's stock market.

The Court of Final Appeal _ the highest stage of Hong Kong's legal system _ was expected to take at least two days to complete a hearing. But the bench of five justices hearing the case was expected to take several days to rule on the case.

Before Tuesday's hearing, the spunky Lo _ who has become a celebrity for standing up to big business _ told reporters that she will fight on and try to stop the listing through other means if the Court of Final Appeal rejects her appeal. She didn't say if she will file a new case offering new arguments against the sale.

Hong Kong's Housing Authority, the territory's housing provider, planned the listing to save it from financial trouble. The stock offering was 130 times oversubscribed, drawing US$36 billion in orders from more than 500,000 small investors.

Tuesday July 5, 8:09 PM
PriceWaterhouse Coopers: Interest in Hong Kong IPOs to wane later this year.

Rising interest rates and soaring oil prices will dampen investors' interest in Hong Kong's initial public stock offerings in the second half of the year, accounting firm PriceWaterhouse Coopers said.

"Because of the uncertainty generated by rising interest rates and higher oil prices, investors are taking a more prudent approach toward the IPOs they invest in," PriceWaterhouse Coopers' Partner Edmond Chan told Dow Jones Newswires.

"That was reflected in the IPOs of the past month but it's a trend that will continue," he said.

Three mainland Chinese companies have recently raised a total of US$6.05 billion through their IPOs. But only Bank of Communications Ltd., the first Chinese bank to list outside of the mainland, managed to attract keen investors' interest and is trading above its IPO price.

Investors responded poorly to the IPOs by China's largest coal producer, China Shenhua Energy Co., whose US$2.95 billion offering was the world's largest so far this year, and by container shipping firm China COSCO Holdings Ltd.

"Both Shenhua and China COSCO suffered because investors (weren't confident) of their industries," said Chan. "China COSCO, particularly, had the added disadvantage of coming to the market when shares were down."

In the first six months this year, 21 companies were listed in Hong Kong, down from 38 in the same period last year, PriceWaterhouse said.

Listings on the main board of Hong Kong's stock exchange dropped 17 percent to 19 companies, though the average deal size of new listings increased to HK$1.34 billion (US$172 million), from HK$1.27 billion (US$163 million). In its calculation of average deal sizes, PriceWaterhouse excluded IPOs that raised more than HK$10 billion (US$1.28 billion).

During the first half of the year, companies listing in Hong Kong raised funds totaling HK$60.5 billion (US$7.8 billion), up from HK$55.9 billion (US$7.2 billion) in the first six months of 2004, according to the company.

Chan said the market was expecting IPOs "from a wide variety of industries in the mainland" in the coming months, "but most of the funding will be raised by financial institutions."

The two big IPOs due this year are China Construction Bank's giant US$5 billion offering and China Minsheng Banking Corp.'s US$800 million IPO. Minsheng - one of China's most prominent private banks - delayed its IPO, originally set for last month, citing "current market conditions."

___

Nisha Gopalan is a correspondent for Dow Jones Newswires.

Major Metal Company To List In Hong Kong

BEIJING, July 5 Asia Pulse - China Minmetals Corporation, one of China's major metals and minerals group, will list part of its aluminium business on the Hong Kong stock market for the first time.

This will be achieved because Oriental Metals Holdings, a Hong Kong based and listed firm of which Minmetals' has a controlling number of shares, will buy Minmetals' aluminium business. Oriental Metals Holdings will then change its name to Minmetals Resources Ltd.

Oriental Metals Holdings will pay for this purchase by giving its parent company 1.009 billion shares worth of HK$2.886 billion (US$370 million). This is how much the aluminium business is worth.

Hong Kong Stock Exchange approved the share issuance application last week. The final step will be completed when shareholders of Oriental Metals Holdings cast their votes at a special shareholders' meeting later this month.

When this "reverse merger" is finalised, Minmetals will still be the controlling shareholder of Minmetal Resources.

A high-ranking Minmetals official said it was the first time the large State-owned enterprise had listed part of its aluminium business on an overseas market.

Minmetals Resources will focus on the trading of alumina, also called oxide aluminium, and plans to purchase or invest in domestic and foreign alumina factories.

The listing of Minmetals' aluminium business on the overseas market will make it more convenient for the corporation to carry out international mergers and acquisitions.

It will also help the company guarantee a stable alumina supply, and give it long-term and favourable business contracts, said Zhang Fang, a metal market analyst at China Securities.

China is the world's largest aluminium producer, but about half of its alumina demand comes from abroad.

China Minmetals Corporation, established in 1950, trades metals, minerals and electrical products.

In 1992, following a decision by the State Council, Minmetals became one of 55 group enterprises to remain a State-controlled company.

In 1999, Minmetals was one of 44 key enterprises managed by the central government. In 2003, Minmetals' total revenue reached over US$11.68 billion, and the total volume of its metal futures business amounted to 230.6 billion yuan (US$27.9 billion).

(XIC)

Funds from IPO rush to reach high of $138b
China Construction Bank is expected; to generate $40b in its share offering
Fiona Lau
6 July 2005
South China Morning Post

Large initial public offerings by China Construction Bank (CCB) and Link Reit are expected to push funds raised this year from new listings to a record $138 billion, according to PricewaterhouseCoopers (PwC).

In the first six months, $60.5 billion was raised - an 8 per cent year-on-year increase - thanks to offerings by Bank of Communications and China Shenhua Energy.

"China Construction Bank is likely to raise up to $40 billion while Link Reit aims for $20 billion. We expect the two to kick off their offerings by the end of this year," said Richard Sun, a partner in the PwC capital market services group.

The last record fund-raising year was 2000, with new listings tapping the Hong Kong market for $132 billion.

Mr Sun is optimistic that CCB can go public this year, noting the Beijing-based lender had successfully introduced Singapore's state-owned investment firm Temasek Holdings and Bank of America Corp as strategic investors.

The legal challenge to the Housing Authority's Link Reit listing also will be clearer soon.

The Court of Final Appeal began a hearing yesterday and was expected to issue a ruling within a month.

The Housing Authority has said it hopes to relaunch the Link Reit soon after a verdict. Link Reit originally planned to raise $23 billion in its listing scheduled for last year.

To achieve PwC's $138 billion fund-raising target, the market needs to yield a further $77.5 billion in the second half of this year.

CCB and Link Reit will account for $60 billion and Mr Sun said smaller offerings could easily fill the $17.5 billion gap.

Although recent newcomers such as China Cosco Holdings, Sim Technology Group and GST Holdings all fell on their trading debuts, PwC capital market services group partner Edmond Chan said this was unlikely to cast a shadow over other listings.

"First-day performance means nothing. We believe potential listing candidates won't be scared by poor trading debuts," he said.

The accounting firm expects 60 new listings this year, 45 on the main board and 15 on the Growth Enterprise Market (GEM).

High oil prices and rising interest rates are concerns for fund-raising, exerting pressure on global stock markets and dampening investment sentiment.

United States interest rates rose a further 25 basis points last week, followed by Hong Kong banks pushing their prime lending rate to as high as 6.5 per cent.

Mr Sun believes oil and rates soon will not be dampening factors. "Crude oil prices seem to have already peaked and we expect the US will only have another two rate increases before the rise cycle ends," he said.

There were 21 new listings in the first half of this year, a 45 per cent drop year on year. Compared with the main board, the GEM offered slim pickings. Only two companies, Finet Group and Sungreen International Holdings, raised a combined $82 million.

Link REIT offer by year-end in event of court win
Elliot Wilson, Hong Kong Standard
July 6, 2005

The revived initial stock sale of the Link REIT, the territory's first real estate investment trust, will go ahead by the end of the year and as early as October or November, said sources close to the deal.

Aborted in December following a legal challenge from senior citizen Lo Siu-lan, the Court of Final Appeal is expected to give the green light early next week to one of the largest global stock sales of the year, said sources Tuesday.

"If the court ruling is positive, there is enough time to do it before the end of the calendar year," said one source close to the deal. "Some REITs have traded up [since the Link REIT was delayed last year] so perhaps this one could trade up a bit, too."

The Link REIT IPO is being underwritten by UBS, Goldman Sachs and HSBC.

JPMorgan is the financial adviser to the government.

Should the REIT listing take place late in the final quarter, investors will be in the position of sinking capital into one or both of two huge Hong Kong stock sales.

China Construction Bank's HK$39 billion IPO, underwritten by Morgan Stanley and China International Capital Corp, is slated to take place in the SAR by November at the earliest.

That could make for a busy finale to a year that, at least in terms of initial equity offerings, started slowly before picking up toward the end of the first half.

The Link REIT, set to become the world's biggest-ever real estate investment trust when first launched, generated HK$280.8 billion in demand, with 500,000 applications submitted by eager retail investors alone.

The government and its financial partners will now need to re-price a deal that initially provided investors with a 6.65 percent yield and priced the Link REIT at an 8.1 percent premium to its net asset value.

Prices lower as IPOs strive to regain lustre
Carmen Chan and Fiona Lau
7 July 2005
South China Morning Post

The once-irresistible appeal of the Hong Kong initial public offering is slow to resurface, with some brokers yesterday saying they had not received any margin finance orders for shares in R&F Properties.

Listing candidate Shinhint Acoustic Link Holdings, well aware of the chilly reception for recent debuts, plans to price its share issue at the low end of the indicative range.

As most brokerages closed finance books for Guangdong-based R&F yesterday, many brokers said response had been tepid.

"We haven't got any subscriptions," a Philip Securities spokesman said.

KGI Securities director Ben Kwong said his brokerage had received only "minimal" orders for R&F.

Celestial Securities director Horace Kwan said only "a few million dollars" worth of margin financing orders had been placed.

R&F aims to raise $2.21 billion.

"It was very tiny compared with the over $2 billion deal," he said. "It's very difficult for [listing] companies to gain investors' attention after three debuts fell last week."

Shipping firm China Cosco Holdings, fire alarm system maker GST Holdings and Sim Technology all ended their first trading days at least 10 per cent lower than their offering prices.

Dao Heng Securities said the response to R&F's launch looked unsatisfactory, given the adverse effect of austerity measures.

R&F is offering 183.92 million shares at $10.70 to $12.03 each. The retail and institutional tranches of R&F close today.

Meanwhile, a source said both the retail and institutional books of Shinhint's up to $80.25 million deal were fully subscribed but the firm might still price its shares at the low end of the indicative range of 80 cents to $1.07.

Another source said both the retail and international books of Shanghai Donghua Petrochemical, which aims to raise $75.19 million, were fully covered.

The retail book of Alltronics, which aims to tap up to $72 million, also closes today.

BOE Technology Group Plans Hong Kong Listing

BEIJING, July 7 Asia Pulse - The BOE Technology Group, China's No. 1 producer of monitors and TV screens, plans to sell H shares in Hong Kong and is currently working on the details of the plan.

If permitted, BOE would become the first domestic firm to issue A, B and H shares.

H shares are shares issued on the Hong Kong stock exchange.

A shares are shares bought and sold using renminbi on China's two stock markets. B shares are sold on the same exchanges using foreign currencies.

BOE's board members on Tuesday voted unanimously in favour of the plan. But it still needs the approval of market watchdog the China Securities Regulatory Commission and Hong Kong Exchanges and Clearing Limited (HKEx).

The Beijing-based company issued B shares on the Shenzhen Stock Exchange in 1997, and A shares in Shenzhen in 2000.

According to the company, it plans to raise HK$2.5 billion (US$ 321 million). About HK$1.8 billion (US$231 million) will be used to pay back a bank loan and another HK$ 700 million (US$ 90 million) will be put into research and development.

The H shares should account for no more than 35 per cent of the firm's total share value, including A, B and H shares.

In January 2003, BOE spent US$380 million to buy the thin-film transistor liquid-crystal display (TFT-LCD) unit of South Korea's Hynix Semiconductor Incorporation.

It was one of the largest overseas forays made by a Chinese technology firm.

In June last year, BOE established its TFT-LCD G5, the fifth generation of this type of product, production line at its Beijing plant and began mass production this May.

The plant has the most advanced equipment and information management system in the industry. The total investment in the G5 line was US$1.24 billion.

The large overseas purchase and the huge investment in the production line brought heavy debt to the firm. BOE has to pay back large bank loans. Statistics show in the first quarter of this year its debt-assets ratio had increased to 72.29 per cent.

Some market insiders say the regulators might not approve the firm's plan to list in Hong Kong because the liquid-crystal display market has been in a doldrums since the middle of last year.

BOE's profits last year were lower than that in 2003 and in the first quarter this year it suffered a loss.

However, the liquid-crystal display industry is very promising in the long term, said Cai Xiao, an analyst from China Securities.

At the moment, all large-sized crystal TV screens in China are imported from abroad.

If BOE can improve its technology and grab this market share, it will enjoy great profit margins in the future, he said.

Moreover, the BOE TFT-LCD G5 line is the biggest TFT-LCD plant in the Chinese mainland, which is supported by China's central government and Beijing municipal government, he said.

Market observers also said the private company has very few non-tradable shares and will not be affected by the on-going share reforms. Issuing H shares will not make the firm's share structure complicated.

Guangzhou developer prices shares near bottom of range
Gladys Tang, Hong Kong Standard
July 9, 2005

Guangzhou R&F Properties, the city's largest developer, will raise almost HK$2 billion after pricing its shares near the bottom of the indicated range as many investors shy away from the firm on concerns over the mainland property market.

The developer priced the shares at HK$10.8 each, barely above the lowest end of a range between HK$10.7 and HK$12.3, sources said. The price translates to about eight times its 2005 forecast earnings.

The low pricing comes after the institutional tranche was 1.5 times covered while only about half the retail tranche was sold, sources said. Of the 184 million shares the company is selling, 10 percent was planned to be allocated to retail investors and the rest to institutional investors.

According to the listing prospectus, the unsubscribed shares in the retail portion will be reallocated to international investors.

"The market sentiment is weak, so I can't see any advantages in rushing to buy the stock. But I'm positive on both the Beijing and the Guangzhou property market,'' Atlantis Investment Management managing director Liu Yang said.

Investor sentiment toward the China property market has been dampened by the government policy to slow growth, including tightened lending, new taxes and restriction on property transfers.

Still, Guangzhou R&F's net profit rose 33 percent to 544.5 million yuan (HK$511.7 million) in 2004 and the company anticipates almost doubling that to at least 1 billion yuan in 2005.

The developer, which said it targets middle to upper-middle income residents, sells private residential properties in both Guangzhou and Beijing. "Local investors are not familiar with the mainland property market, which may be further curbed by additional austerity measures, so they chose to stay away from it,'' Delta Asia Financial head of research Conita Hung said.

Guangzhou R&F said Thursday, the day that the offer was closed, that it incorrectly stated the land costs it paid for the R&F Square South Court project as 218,883 yuan in the listing prospectus when the figure should have been 218.883 million yuan. Also, its combined 7,819 unsold parking spaces were mistakenly stated as being sold.

The company will start trading on July 14 under the stock code 2777. Morgan Stanley and Credit Suisse First Boston are the sponsors of the deal.

Also listing is Alltronics Holdings, a maker of electronic household appliances, which sold 90 million shares to raise HK$72 million at HK$0.8. It is scheduled to start trading on July 15.

Perfume maker to seek $150m in IPO
Wong Ka-chun, Hong Kong Standard
July 13, 2005

Shenzhen Guanlida Boton Flavor and Fragrances, one of the mainland's biggest makers of essence and perfume, plans to raise up to HK$150 million in an initial public offering to expand amid rising demand for its products, sources said.

Guanlinda is hoping to raise between HK$130 million and HK$150 million in a first-time share sale in Hong Kong as early as September, people close to the deal said. Sun Hung Kai Securities is sole arranger for the sale.

"The company will submit the application to Hong Kong Exchanges and Clearing shortly and hopes to sell shares not later than October,'' the source said.

Guanlida, which will be renamed for the listing, has organized site visits for potential investors several times to market the firm, highlighting its operation and expansion plan, he said.

A string of small to mid-sized Chinese consumer firms are seeking overseas listings, especially in Hong Kong, betting that investors will be lured by the mainland's rapid economic growth.

China Hai Sheng Holdings, the mainland's largest apple juice concentrate producer, plans to raise HK$250 million to HK$300 million in an initial public offering on the main board in September. That same month, Jiangsu Yurun Food Group plans to launch its Hong Kong initial public offering to raise up to HK$1.6 billion.

By listing in September, the companies have avoided mega IPOs such as Bank of Communications and China Shenhua Energy in June, as well as possible share sales by China Construction Bank and the Link REIT.

Guanlida, based in Shenzhen, specializes in producing essence and fragrance for foodstuffs and tobacco. Almost all its products are sold to the domestic market, and the firm hopes its overseas listing will enhance its corporate image and provide entry to the international market.

Analysts said the business model of Taiwan-based Vedan International may be comparable to that of Guanlida. On the Hong Kong main board since 2003, Vedan is the only locally listed food additive manufacturer and its shares are traded at 6.6 times 2005 earnings.

South China Morning Post
July 13, 2005
Relaxed reits rules spur China developers
Mainland players put finishing touches to portfolios worth billions for listing in Hong Kong
Ernest Kong

Up to five mainland developers are arranging for the Hong Kong sale of China properties worth billions through real estate investment trusts (reits), following the easing of restrictions.

Prompted by tightened funding and a wave of austerity measures to cool the overheated property sector, mainland developers were keen to securitise some of their real estate properties to raise funds.

Last month, the Securities and Futures Commission (SFC) lifted restrictions on cross-border property investment and increased the gearing ratio from 35 per cent to 45 per cent of the gross total asset value of a reit.

Reits are funds that pool property assets to yield a stable rental income. Previously, reits had been restricted to Hong Kong property.

Industry players said four to five mainland developers were making arrangements to list reits in Hong Kong. Some of the mainland property owners had already begun preparatory work, having anticipated modifications to the reit code, said a property consultant.

Market sources expect Hong Kong-listed Guangzhou Investment to be the first Hong Kong-listed China reit. The developer is expected to launch a $ 2 billion reit comprising four to five shopping malls.

Since setting reit regulations in August 2003, the SFC has authorised only one reit so far - the Link Reit for the Housing Authority to sell $ 23 billion worth of car parks and shops. Meanwhile, a legal challenge has held up the launch that was scheduled for last year.

"Guangzhou Investment had initially planned to float its portfolio in Singapore but veered back to Hong Kong when the SFC decided to relaxed the reits code," said a source close to the deal.

"The firm had already done most of its preparatory work when it was planning for a Singapore-listing. So the reit may be ready for launching very soon."

The Singaporean government is keen to attract overseas listings of reits by offering attractive tax conditions, but Chiu Kam-kuen, an executive director of DTZ Debenham Tie Leung, said mainland developers preferred to float their portfolios in Hong Kong.

"A more favourable pricing of the reit can be achieved by listing in Hong Kong," Mr Chiu said. "Investors here are familiar with the China properties."

He said portfolios of China reits for listing in Hong Kong comprised mostly office buildings, shopping malls, and logistics hubs in major cities such as Guangzhou, Shanghai and Beijing, which investors were familiar with.

"The portfolio does not have to be top-notch, as long as the investment properties have potential for enhancement by asset managers. A good income flow is one of the most important factors in attracting investors," Mr Chiu said.

Nicholas Wong Wing-chiu, principle of DBS Bank's real-estate group, said the lacklustre response to recent initial public offerings of mainland properties would not affect the forthcoming launch of China reits.

"Reits are more about asset management, and how to improve the value of properties.

"Investors differentiate them from investing in mainland developers who take significant risks amidst a wave of cooling down measures," Mr Wong said.

He added that the return on reits hinged largely on the local economy and players' spending power.

"The potential of China reits is greater than many imagine. Actually, it is not limited to a portfolio of listed mainland developers. A lot of non-listed companies also have plenty of suitable properties for listing," Mr Wong said.

Hosco unit looking for a berth on HK bourse
Dry-bulk shipper aims to raise US$100m and is unfazed by China Cosco's slide
Carmen Chan
13 July 2005
South China Morning Post

Shipping firm North China Lines plans to list on the Hong Kong stock exchange this year, despite the bleak greeting China Cosco Holdings received in its initial public offering last month.

"The company hasn't submitted an application to the stock exchange yet but it plans to raise about US$100 million by the end of the year," said one source, adding the company will list as a Hong Kong-registered red-chip instead of an H share.

Management was undeterred by the reception for China Cosco, according to the source.

"Unlike China Cosco, North China Lines serves mainly the domestic markets, which are less volatile," the source said.

The company has hired Goldman Sachs and JP Morgan as sponsors, the source added. Both investment banks declined to comment.

If North China Lines makes it to market before the planned dry-bulk division spin-off of China Shipping Development, it would become the fifth shipping firm to list on Hong Kong's main board.

Established in 1992, North China Lines is the chartering subsidiary of Hebei Ocean Shipping (Hosco), which owns a fleet of 22 vessels with 1.34 million deadweight tonnes, according to Hosco's website.

Clients include private traders and governmental organisations that engage in minerals and grain trade.

However, market observers said dry-bulk shippers may need bargain-basement pricing to lure investors, who are sceptical of the sector's prospects.

"Market sentiment towards shipping is not very positive at the moment," said Mandy Chan, portfolio manager at ABN Amro Asset Management, citing high oil prices and uncertainty over bulk freight rates.

At the weekend, South Korea's biggest dry-bulk goods shipper STX Pan Ocean slashed the offer price of its approximate S$538 million initial public offering to 90 Singapore cents per share. It had initially hoped to get up to S$1.27 per share.

Two weeks ago, China Cosco, the country's biggest container shipping line, fell 10 per cent in its trading debut after retail investors had subscribed for only 50 per cent of the shares on offer.

China Shipping Development trades at about 7.3 times forward earnings, while dry-bulk firm Pacific Basin trades at about 4.4 times forecast earnings. China Cosco, which ended at $3.80 yesterday - about 10 per cent lower than its issue price - commands a price-earnings ratio of 5.7 times. China Shipping Container trades at 3.8 times earnings.

Mainland's port operators are also hoping to tap Hong Kong for funds. Xiamen Port is expected to submit a listing application soon. Its sponsor will be BNP Peregrine.

New listings gain on debut
Gladys Tang, Hong Kong Standard
July 15, 2005

Two newly listed companies rode a rising stock market to post gains on their first day of trading, reversing a recent pattern in which new issues have sunk on their debut.

Mainland developer Guangzhou R&F Properties and handset maker Shinhint Acoustic Link surprised traders by closing higher on a day when the benchmark Hang Seng index climbed to a four-year high. R&F closed at HK$11.15, up 3.24 percent from its offering price of HK$10.80, while Shinhint, which raised HK$60 million in its initial public offering, closed 1.25 percent above its offering price of HK$0.80 at HK$0.81.

The gains for R&F, which raised HK$2 billion in its IPO, were all the more surprising since demand for its shares from individuals, with the retail part of the sale not fully subscribed. Moreover, three IPOs, including China COSCO Holdings, fell at least 10 percent on their trading debuts last week.

Today's gains, however, may not be much of a harbinger, since few shares actually changed hands. R&F's turnover totaled just HK$68.6 million Thursday.

Investors remain reluctant to place bets on mainland developers given the government's continuing efforts to rein in the more speculative parts of the property market. Sun Hung Kai strategist Castor Pang warned investors to avoid mainland property stocks given the uncertainty and the prospect that Beijing may take additional measures to cool demand. Company executives, though, were having none of that Thursday. R&F Properties chairman Li Sze-lim reassured investors at the listing ceremony that "prices of its property in Guangzhou and Beijing rose 5 to 8 percent since the start of this year and I expect they will rise about 10 percent in 2005."

The company, which has property investments in both fast-growing cities, expects its net profit will almost double to at least 1 billion yuan (HK$940 million) in 2005.

Perhaps, but Tung Tai Securities associate director Kenny Tang still expects the shares to slide since it is trading at a premium to its net asset value at a time when most Hong Kong-listed property stocks are trading at a discount.

China Port Operator Mulls IPO Next Year
Dow Jones Newswires
14 July 2005

SHANGHAI -- Shanghai International Port (Group) Co., the operator of one of the world's busiest ports, is considering an initial public offering as early as the second half of next year after recently restructuring into a shareholding company.

While the port operator's first choice is to list shares in Hong Kong, it hasn't decided on a listing destination or fund-raising goal, Wang Qingwei, general manager of the investment and development department, said in an interview. It also has yet to select an investment bank to underwrite the deal.

If SIPG begins planning its initial offering now, it could list in one year, Mr. Wang said, adding the IPO timing depends on market conditions. SIPG is the controlling shareholder of Shanghai-listed Shanghai Port Container Co., one of more than 40 companies picked by the government recently to float their large quantities of nontradable shares.

The group's overseas fund-raising plan highlights the growing prominence of China's port and shipping firms, as the traffic of goods flowing in and out of the country expands along with the booming economy. China this week reported exports jumped 33% in the first six months of 2005 from a year earlier, while imports grew 14% over the same period.

Yet investors may be cautious about buying shipping-related offerings, after shares of shipping company China Cosco Holdings Ltd. fared badly last month in their debut in Hong Kong.

North China Lines eyes Hong Kong listing
14 July 2005
Lloyd's List

YET another Chinese maritime firm is eyeing a Hong Kong listing, with mainland shipping firms increasingly resembling their Greek counterparts in their rush to cash in via initial public offerings, writes Sam Chambers in Hong Kong.

The latest to throw its hat into the increasingly shipping-centric Hong Kong stock exchange is North China Lines, a division of Hebei Ocean Shipping Co, which is looking to raise US$100m by the end of the year. Hosco has 22 ships aggregating 1.34m dwt.

Goldman Sachs and JP Morgan have been appointed as sponsors of the launch.

NCL, founded in 1992, is the dry bulk chartering subsidiary of Hosco.

The news that it is listing follows hot on the heels of the disappointing debut by China Cosco Holdings, the container offering from the mainland’s largest shipping conglomerate, which made just US$1.2bn on June 30, having at first looked for as much as US$3bn, and promptly saw its share price slide 11% on the first day of trading.

Meanwhile, a number of port firms including Xiamen and Dalian are also eyeing listings, and China Shipping Development has mooted the idea of spinning off its bulk division into a separate listing.

Sources close to the NCL deal were quick to point out the differences between NCL and China Cosco Holdings, with NCL being primarily a dry bulk domestic player as opposed to a more volatile international container player.

“There will be need to be some great spin on [an NCL IPO] and slap a gag order on all the directors,” said one Hong Kong shipping observer. These remarks come in light of both the questionable state of the bulk markets and the tortuous path to the recent Cosco launch, which saw its chairman get an official rebuke for offering contradictory statements to its sponsors’ prospectus.

Hong Kong court clears way for world's largest property sale
July 20, 2005

HONG KONG (AFP) - Hong Kong's highest court has dismissed an appeal against the government's sale of publicly owned shopping centres and thousands of parking spaces, paving the way for the world's largest property privatisation plan to go ahead.

The appeal was brought by a 67-year-old welfare recipient who wanted to have the three-billion US dollar plan declared unlawful, saying it undervalued the assets and would likely force up rents for public housing tenants like herself.

All five judges on the Court of Final Appeal, however, ruled that the government had the rights to sell its assets, ending Lo's last hopes of preventing the sale.

"The Housing Authority plainly has the power to sell the properties, being retail and carpark facilities, to the Link Real Estate Investment Trust (REIT)," Chief Justice Andrew Li said in a court statement referring to the vehicle originally set up by the government to hold the sold assets.

A spokeswoman for the Housing Authority, the government agency which owns the assets, said earlier that if it won the case, it would relaunch the sale as soon as possible.

Commenting on the verdict, Lo's lawyer Mark Daly said: "We have to go with the judgement ... (Lo) may have comments later."

Although Lo's two previous attempts to prevent the sale had been thrown out by lower courts, she claimed a moral victory last December when her challenge forced the government to shelve its plan to float the REIT on the stock exchange until the courts established the legality of the plan.

July 20, 2005
Government Press Release
Link REIT listing to go forward 'soon'

The listing of the Link REIT will be arranged as soon as possible, Secretary for Housing, Planning & Lands Michael Suen says, now that the Court of Final Appeal's ruling has ascertained the legality of the Housing Authority's sale of retail and carpark facilities to the real estate investment trust.

Welcoming the court's judgement today, Mr Suen said the issue has gone through three judicial proceedings and all judgements are in favour of the Housing Authority's move.

He noted there is solid support for the Link REIT listing, and the proposal complies with the Housing Ordinance. The Government will prepare the listing in the market as soon as possible, and care will be exercised in disseminating information.

Mr Suen said the Government does not have a timetable for the listing, but hopes to achieve it in the shortest possible time. The revenue it generates will help the Housing Authority take forward its public housing projects.

Jiangxi Copper raises $880m
Wong Ka-chun and Gladys Tang, Hong Kong Standard
July 26, 2005

Jiangxi Copper, the largest copper producer in China, has raised about HK$880 million by selling new shares to boost capacity as prices of the metal rose to a record, market sources said.

Jiangxi Copper sold 231 million new H shares to investors Monday, probably at about HK$3.81 each, at the middle of the indicated range of between HK$3.725 and HK$3.90 each, sources said.

The price represents a 7 percent discount to HK$4.10 before trading was suspended Monday, they said. The stock has fallen 7.34 percent so far this year.

The share placement received mixed response from fund managers, who were concerned about a term that the shares will be delivered 14 days later instead of the usual eight to 10 days.

"It's not easy to predict the movement of the stock in such a long timeframe," said a fund manager who subscribed the shares at a low-end price.

"It is also not clear why the company needs so much [cash] as it has planned to raise two billion yuan (HK$1.91 billion) from an A shares convertible bond sale this year," he added.

Still, sources said the offer was fully booked within 45 minutes after the launch, and the deal's global bookrunner Citigroup has bought a number of shares.

Analysts said high copper prices attracted some long-term investors to subscribe the shares. Tight domestic and global supply boasted copper prices to a record of US$3,482 (HK$27,159) a tonne on the London Metal Exchange Monday. "Driven by China's strong demand for copper, [the copper] prices will hover around the current high levels," KDB Asia assistant manager Sam Ho said.

Jiangxi Copper earlier said it plans to boost smelting production capacity from the current 400,000 tonnes to 700,000 tonnes in 2007 by building new plants.

The company may also benefit from yuan's appreciation as it buys raw material overseas while exports account for a small fraction of its total sales, analysts said. In 2004, the company derived 92.7 percent of its total turnover from the mainland.

Better days ahead for mainland IPOs
Dow Jones
July 27, 2005

Mainland companies looking to raise capital in Hong Kong's equity market over the past two months have faced a lukewarm investor response amid a glut of share offerings.

But better days are ahead for an improved investor reception for mainland IPOs, says Sean Wallace, managing director and head of capital markets for Asia Pacific at JPMorgan in Hong Kong.

So far this year, the share offerings of a number of mainland issuers, including big-ticket offerings from China COSCO Holdings and China Shenhua Energy, were priced at the low end of their respective price ranges.

Just how crowded the market for initial public offerings has been of late is shown by data from Dealogic, which calculates Chinese and Hong Kong companies sold US$5.45 billion (HK$42.51 billion) of new shares in June, compared with just US$1.89 billion between January and May.

But improving equity market conditions, the revaluation of the yuan and renewed investor interest in mainland issues will help kickstart the IPO market, Wallace said.

He said the 2 percent upward revaluation of the yuan gave an instant boost to mainland stocks listed in Hong Kong, as well as the city's broad market. Going forward, the revaluation should improve the economic fundamentals of Chinese companies, granting them better access to capital in the longer term.

"In general, the revaluation reduces trade tensions with China and improves the ability of Chinese companies to buy raw materials priced in dollars," said Wallace.

He said the recent low IPO pricings for Chinese companies should drive investor interest in these issues as they retain attractive valuations.

"This is a short-term loss with a long-term gain. These companies may not have gotten the last dollar out of their IPOs, but because they trade well institutional investors have continued interest in buying them," Wallace said.

Take Shenhua Energy, a major mainland coal producer. Its shares closed at HK$7.30 on its June 15 debut on the Hong Kong stock exchange, below its HK$7.50 IPO price. But the stock closed Monday at HK$7.85 and has reached a peak of HK$8.

What is more, said Wallace, the central government doesn't have "aggressive valuation ambitions" for listing stocks of state-run companies and is pricing them "appropriately."

The prospect of increased demand and better IPO prices for future mainland offerings will be good news for global investment banks, which compete ferociously to take Chinese companies public.

Unlike Taiwan and India, where underwriting fees have fallen to rock-bottom levels due to fee undercutting, mainland equity offerings still pay decent margins.

According to Dealogic, which tracks capital markets data, investment banking fees for Bank of Communications' US$1.9 billion IPO in June were US$50 million, a much higher margin than on, say, Philippine sovereign debt deals.

For JPMorgan, mainland IPOs will continue to be the "largest source of fees," said Wallace. "There's no doubt China is the most important market, which is expected to raise billions of dollars in new offerings."

Along with jumbo offerings by state-owned enterprises, Wallace expects an increasing number of second-tier companies to tap mainland and Hong Kong equity markets for funds.

Wallace said China's IPO pipeline in the next 24 months includes at least 15 mainland banks, with two or three in the next few months, and a handful of utility, shipping and coal companies.

He said he doesn't expect many Chinese companies to opt for dual listings on domestic stock exchanges and the New York Stock Exchange due to stringent US regulatory requirements.

Publisher set for $176m with top-end share price
Carol Chan and Wong Ka-chun, Hong Kong Standard
July 28, 2005

Hong Kong Economic Times Holdings has priced its initial public offering at the top end of the indicated range, after receiving heavy demand from both retail and institutional investors on expectations local publishers will benefit from the territory's economic rebound, said market sources.

HKET, the publisher of Hong Kong's leading Chinese-language financial newspaper, has priced the shares at HK$1.70 each, or 11 times its historical earnings, from a range that starts at HK$1.43, said sources. The company will raise HK$176.8 million by selling 104 million shares.

HKET closed the IPO at noon Wednesday and attracted orders for almost 400 times the number of shares on offer to retail investors, said sources. The institutional part of the sale was at least 10 times oversubscribed.

The company publishes the Hong Kong Economic Times, PC magazine e-Zone and recruitment paper Career Times. It also owns financial information provider ET Net.

Hong Kong Economic Times has a daily circulation of about 80,000 - well above that of its main rival, Hong Kong Economic Journal, which sells 20,000-40,000 copies a day, according to estimates by BNP Paribas, HKET's sponsor and sole bookrunner. Oriental Daily and Apple Daily are the territory's two biggest sellers with 445,000 and 350,000 copies, respectively, said BNP.

For the year to the end of March, HKET posted a net profit of HK$65 million, more than double the HK$26 million it earned in the previous, SARS-affected year, according to its sale document.

The company plans to use HK$50 million of the proceeds to fund its new businesses on the mainland, including HK$30 million for advertising and possible co-operative ventures with other mainland media firms, and HK$20 million to build ET Net's market presence.

It also plans to spend HK$30 million to launch two magazines in Hong Kong, and has allocated HK$25 million over three years to upgrade its newspaper production facilities in the territory.

CHINA PRESS: Yongle Home Appliance Plans Hong Kong IPO
Thursday August 4, 2005, 2:25 pm

BEIJING (Dow Jones)--China Yongle Home Appliance Co. will soon launch an initial public offering in Hong Kong, the China Daily reports.

Yongle, which is 25%-owned by U.S. investment bank Morgan Stanley (MWD), had delayed its plan to list in July due to unfavorable market conditions, the report said, citing Yongle President Chen Xiao. Chen is the company's majority shareholder. Chen didn't give a timetable for Yongle's listing.

Yongle's IPO will likely raise $200 million to $300 million, with Morgan Stanley being one of its underwriters, the report said.

Newspaper Web site: http://www.chinadaily.com.cn

Construction equipment maker plans $400m IPO
Carol Chan and Lee Yuk-kei, Hong Kong Standard
August 5, 2005

China Infrastructure Machinery Holdings, a mainland construction equipment maker, hopes to raise more than HK$400 million next month in an initial public offering in Hong Kong, according to market sources.

Two other mid-size offerings are already planned for September, with mainland watch distributor Xin Yu Hengdeli planning to raise HK$200 million to HK$300 million. China Hai Sheng Holdings, the country's largest apple juice concentrate producer, hopes to sell shares worth about HK$300 million. CLSA is arranging the Hai Sheng sale while Guotai Junan (Hong Kong) is the sponsor and sole bookrunner for Xin Yu Hengdeli.

China Infrastructure Machinery, which picked Cazenove Asia as its sponsor, will use the funds raised in the IPO to fund capital spending, including the construction of new factories.

It currently operates two plants in Shanghai and Fujian province, with annual production capacity of 15,000 wheel loaders and 2,000 road rollers.

The company has profited from China's booming economy and its massive need for infrastructure construction, though austerity measures imposed by Beijing have slowed its growth. Demand for construction equipment slumped 20 percent in the first quarter from year-ago levels.

Even so, China Infrastructure Machinery saw sales of wheel loaders, common on large construction projects, jump 17 percent in the first five months of the year to 7,002. Overall, the firm's revenues grew to more than one billion yuan (HK$959.3 million) in the first four months of 2005, with most of its sales to the high end of the construction and mining equipment markets. The company has 14 percent of the heavy-duty construction equipment market. Shares of First Tractor, another construction equipment maker traded in Hong Kong, currently fetch HK$1.50, about 22 times forecast 2005 earnings.

Guangdong logistics firm to raise $500m in IPO
Carol Chan, Hong Kong Standard
August 8, 2005

South-China Logistics, a company controlled by state-owned Guangdong Provincial Communications Group, hopes to raise about HK$400 million to HK$500 million in the fourth quarter in an initial public offering in Hong Kong, market sources said.

The Guangdong-based firm, which picked China Everbright Capital as its sponsor, will use the funds raised to fund its expansion.

"The preparation is on track. The State-owned Assets Supervision and Administration Commission of the State Council approved its overseas listing plan in January. It also filed its listing application to the China Securities Regulatory Commission and the Hong Kong stock exchange, and is now waiting for their approval," the sources said.

The state assets agency gave the green light for the company to sell 173.065 million H shares, including 157.33 million new shares and 15.73 million existing shares.

South-China Logistics has had a near monopoly on providing third-party logistics and other services on the expressways in Guangdong thanks to its parent, GPCG, which owns interests in 85 percent of expressways in the province.

Its business scope includes information and logistics consultation, storage, transportation agent services, information processing, freight forwarding.

Its main subsidiary, Taiping Intersection, is the top profit contributor. It provides logistics services covering Guangzhou-Shenzhen Expressway, Humen Bridge and the Guangzhou-Zhuhai section of Beijing-Zhuhai Expressway. It also has a 95.56 percent stake in Guangdong Top-E Expressway Service, which has 13 pairs of expressway service zones and will increase this to 95 pairs in 2010.

Other stakes include 55 percent in Guangdong Weisheng International Freight Forwarding and 71 percent in construction materials provider Guangdong Xinyue Communications.

South-China Logistics posted a 44 percent increase in net profit from 42.25 million yuan (HK$40.47 million) in 2002 to 60.78 million yuan in 2003, on turnover of 1.364 billion yuan. At the end of 2004, it had total assets of 2.311 billion yuan, according to its Web site.

Analysts said there were few listed companies that can be used for comparison - in fact China Merchants DiChain (Asia) may be the only candidate.

DiChain, a logistics and warehouse operator listed on the main board, suffered a loss last year due to an asset provision. It reported a net loss of HK$13.4 million for the year ended December 2004, compared with net profit of HK$36 million a year ago.

WorldMetal raises $516m from share placement
Wong Ka-chun, Hong Kong Standard
August 11, 2005

WorldMetal Holdings, a Hong Kong secondboard-listed provider of software for metal-trading companies, and its majority shareholder have raised HK$516 million from a share placement, taking advantage of the soaring share price.

WorldMetal sold 400 million shares at HK$1.29 each, near the top of the range of HK$1.18 to HK$1.32, or a 9.8 percent discount to Tuesday's closing price, market sources said. Its shares were suspended from trading Wednesday. They have gained 4,831 percent from HK$0.029 at the beginning of the year to HK$1.43 at Tuesday's close.

WorldMetal sold 230 million new shares and either its parent - mainboard-listed Burwill Holdings - or Burwill's chairman sold 170 million existing shares, a source said. The combined shares account for about 28 percent of its enlarged share capital.

About one-fifth of the share placement was allocated to European investors, 15 percent to the United States and the remainder to Asia, sources said.

WorldMetal said in June it will invest A$10 million (HK$59.15 million) in a joint venture with Australian casino operator Tabcorp Holdings to provide terminals for lottery outlets in China.

"The joint venture has completely transformed the company, and the new business should dominate its revenue," a source said.

WorldMetal owns one-third of the venture, Tabcorp International Hong Kong, which was granted a 10-year contract to provide software, terminals and technology support to Beijing Lottery Online Technology - the only licensed firm to run an online lottery in China. The venture is entitled to 0.92 percent of the revenue generated by the lottery, and it plans to launch online a lottery-like game called Keno in 2006.

Merrill Lynch forecasts its revenue to increase from US$1.9 million (HK$14.8 million) in the first year of operation to US$76 million a year from the fifth year onwards. WorldMetal, with market value of HK$1.72 billion, had a net loss of HK$2.84 million in the first half, compared to a loss of HK$1.2 million a year ago. Turnover fell HK$4.3 million from HK$39.5 million.

HKEx stays on course for record profit
Giant share offers and mainland reforms have boosted earnings for the exchange, writes Enoch Yiu
15 August 2005
South China Morning Post

The revaluation of the yuan and a healthy crop of new mainland listings have pushed turnover and fund-raising on the local stock market to record highs so far this year and in the process are likely to have produced handsome profits for its operator, Hong Kong Exchanges and Clearing (HKEx), according to brokers.

Optimistic investors have bid up HKEx shares ahead of the company's interim results announcement on Wednesday, pushing their price to a record close of $25 on Friday, after they hit a record intra-day high of $25.30. The stock listed in June 2000 at $3.88.

According to a poll of brokers conducted by Thomson Financial, HKEx is expected to achieve 6.3 per cent year-on-year growth in net profit to $1.12 billion this year, up from $1.05 billion last year.

Christopher Cheung Wah-fung, chairman of Christfund Securities, expects the exchange to report a first-half net profit increase of 18 per cent, and an increase of 28 per cent for the whole year.

Last year, the exchange reported interim profits of $504.99 million.

"The turnover and index levels have reached their highest point in four years. We are going to see exchange profits hit another record high too," Mr Cheung said.

Hung Sing Securities director Gilbert Cheung Yik-cho agrees.

"Market turnover has been strong in the first half which has brought in more trading fee income. In addition, several mega-sized initial public offerings have also brought in more listing fee income," Mr Cheung said.

Almost one-third of HKEx income is derived from trading and settlement fees paid by investors on each share transaction, so higher market turnover provides more income for the exchange.

Daily turnover on the exchange has exceeded $20 billion in the past four weeks. During the first seven months of the year it averaged $17.3 billion, comfortably beating the daily turnover record of $15.9 billion attained last year.

Another major source of income for HKEx are the listing fees paid by firms making initial public offerings and annually thereafter.

The fees are structured in such a way that large players pay more than smaller firms. The fees payable by a company on its initial listing range from $100,000 to $650,000, while annual fees range from $100,000 to $1.18 million, depending on the market capitalisation of the business.

In June, the stock exchange witnessed the highest level of funds raised in a single month - $53.3 billion in gross proceeds - thanks to giant IPOs from China Shenhua Energy, Bank of Communications and China Cosco Holdings.

The previous record was $44 billion in June 2000, when China Unicom opened its IPO.

There are 60 companies currently applying to list on the local bourse, including state-owned China Construction Bank, which is expected to raise US$5 billion, and the Housing Authority's $30 billion Link Reit, which would be the largest real estate investment trust in the world to list.

Goldman Sachs estimates that HKEx's profits will rise 10 per cent this year to $1.16 billion and grow another 10 per cent next year to reach $1.28 billion.

"We see HKEx as a multi-year play on China growth and reform. The renminbi revaluation will likely attract more capital inflows to Hong Kong. Good growth in China should also lead to strong potential market upside and IPO activities on the stock exchange," the investment bank said in a report.

Goldman Sachs estimates that in the most optimistic scenario, daily turnover could rise from $17 billon in the year to date to $34 billion in 2008, assuming $400 billion in gross annual IPO proceeds and a 10 per cent rise in the Hang Seng Index every year.

Even if trading is more subdued, the bank says that average daily turnover could rise to $19.5 billion next year and $23.7 billion in 2008.

JPMorgan also recently revised its HKEx price target, raising it to $26.50 per share, up from an original target of $22. It expects the exchange's net profit to increase by 14 per cent to $1.21 billion this year.

"We believe that turnover momentum and market sentiment are strengthening following the recent appreciation of the yuan. We have already seen a strong pick-up in market turnover in the month of July after a relatively quiet second quarter," it said in a report.

Deutsche Bank believes that HKEx profits will increase 12.5 per cent this year to $1.19 billion.

"We believe the hot summer activity has been triggered by a more positive outlook on Hong Kong and the yuan revaluation theme," a Deutsche Bank report said.

Louis Wong Wai-kit, director of Phillip Securities, also anticipates that HKEx's profits will be healthy but expressed caution that poor investment income in the first quarter may have a dampening effect on growth.

Weakness in international bond markets had a negative impact on first-quarter earnings at the exchange which reported a 22 per cent year-on-year decline in earnings to $245.42 million. A year earlier, HKEx had achieved earnings of $312.89 million.

Luxury watch distributor seeks investors for IPO
Carol Chan and Lee Yuk-kei, Hong Kong Standard
Augsut 20, 2005

Xin Yu Hengdeli - the mainland's largest watch distributor - is in talks to bring in strategic investors and plans to kick off its US$50 million (HK$390 million) Hong Kong initial public offering in a month, market sources said.

The privately-owned luxury watch distributor, which has a joint venture with Swiss watchmaking group, Swatch Group, secured the stock exchange's approval of its share sale Thursday.

Guotai Junan Securities is the sponsor and lead manager for the share sale.

Xin Yu Hengdeli, which runs 51 shops in China, is authorized to sell more than 30 well-known watch brands such as Swatch, Omega, Calvin Klein, Audemars Piguet, Maurice Lacroix, Baume & Mercier, and is the exclusive wholesaler for more than 10 brands in the country.

The company also develops its own brand name product, "Nivada", which sells from 2,000 to 6,000 yuan (HK$5,748). Sources said it posted a net profit of about HK$100 million last year.

Xin Yu Hengdeli is set to start investor presentation within weeks, with its listing planned for next month, sources said. Part of the proceeds will be used to further expand its sales network. "It's not difficult to convince investors to buy China retail and consumer plays," an analyst said, as purchasing power is increasing, especially among the middle class.

Xin Yu Hengdeli plans to price its shares at between 12 and 15 times earnings - lower than other China retail stocks - to lure investors, sources said. By comparison, Gome Electrical Appliances Holding, the country's largest household appliance retailer, is trading at 17 times its estimated earnings. China's largest supermarket chain, Lianhua Supermarket, trades at 20 times while its smaller rival, Wumart Stores, Beijing's top-selling supermarket chain, trades at 24 times.

China's retail stocks have been performing well as investors are upbeat on the market. Lianhua's and Wumart's share prices have more than doubled since the firms' listing in 2003.

Lianhua's shares closed at HK$8.10 Friday, compared with its initial public offering price of HK$3.875. Wumart closed at HK$13.05, against its IPO price of HK$6.22.

Malaysia's Lion To List Parkson Retail On Hong Kong Bourse

KUALA LUMPUR, Aug 23 Asia Pulse - Lion Diversified Holdings Bhd (KLSE:2887) plans to list its wholly-owned subsidiary, Parkson Retail Group Ltd, on the Hong Kong Stock Exchange (HKSE).

Parkson Retail, a wholly-owned subsidiary of PRG Corp Ltd, has submitted an application to the HKSE for a proposed listing, Lion Diversified said in a filing to Bursa Malaysia.

It said the retail group will be listed in Hong Kong to tap funds that are needed for the expansion of its stores in China.

The group will offer a combination of new shares for subscription and existing shares for sale.

Under a reorganisation before the listing in Hong Kong, Lion Diversified will consolidate a majority of its retail operations in China under Grand Parkson Retail Group Ltd, a wholly-owned subsidiary of PRG Corp, which in turn is owned by Lion Diversified.

Lifestyle share placement raises $1.26b
Lifestyle International Holdings, operator of Hong Kong's Sogo Department Store, raised HK$1.26 billion in a share placement intended to fund expansion at home and in the mainland.
Wednesday, August 31, 2005
Hong Kong Standard

Lifestyle International Holdings, operator of Hong Kong's Sogo Department Store, raised HK$1.26 billion in a share placement intended to fund expansion at home and in the mainland.

The company increased the number of new shares sold to 100 million and priced the offer at HK$12.55 per share, the lower end of the indicative range, market sources said. The price was a 6.7 percent discount to the closing share price of HK$13.45 before the stock was suspended Tuesday.

Lifestyle priced the shares at the lower end of the range to give investors more chance to gain from a rise in the market price when trading resumes, fund managers said.

The 100 million new shares represented 13.65 percent of enlarged share capital. Lifestyle originally planned to sell 75 million new shares at HK$12.50 to HK$13.10, but increased the offer to satisfy investor demand, a person familiar with the sale said. Most shares were placed in Asia but there was strong interest from Europe and the United States too.

Deutsche Bank, Germany's largest bank, arranged the sale. Market sources said Lifestyle would use the proceeds to finance its new Hong Kong outlet and expansion in mainland China.

The company plans to open a new Sogo store in the subterranean Amazon shopping mall in Tsim Sha Tsui, at a cost of HK$100 million, by the end of September. Plans are also afoot for a third outlet, which Nomura International analysts said is likely to be located in outlying Tsuen Wan. Managing director Thomas Lau Luen-hung said earlier this year that Lifestyle would ramp up its expansion in the mainland, where six new stores are planned over six years, and in Macau, where Las Vegas-style casinos draw an influx of mainland visitors.

Lau also said the company may acquire some lifestyle brands.

Analysts have questioned the need for Lifestyle to issue more shares. At the end of June, it had HK$1.4 billion in cash on hand, and its operating cashflow is healthy, estimated by CSFB at over HK$700 million per year.

JPMorgan on Tuesday downgraded the stock to neutral, saying the impact of expansion on earnings per share could be worse in the earlier years because of large start-up costs.

Lifestyle bought Hong Kong Sogo in 2000 when its Japanese parent company collapsed under bad debt. The store, a fixture in Causeway Bay for almost 20 years, had average daily traffic of almost 90,000 shoppers during the first half, and its share of Hong Kong's department store market was 18.5 percent. The department store saw sales jump 19.7 percent in the first half of this year to HK$888 million. Its average sales rose 10 percent to HK$385.

In Hong Kong, Lifestyle also operates the Nufront Mall, opposite Sogo, and Daiso Land Ten Dollar Shops. In China, it operates Jiu Guang department store in Shanghai, which lost HK$28 million in the first half on average monthly sales of about HK$46.97 million.

Internet firm eyes $400m GEM float
FibrLink public offering will be a shot; in arm for launch-starved second board
Fiona Lau
31 August 2005
South China Morning Post

Mainland internet service company FibrLink Communications is planning a $400 million listing on the Growth Enterprise Market (GEM) next month - the largest fund-raising on the second board since Tom Online's $1.5 billion float in March last year.

The listing will be a shot in the arm for the GEM, which this year has secured only three listings that raised a combined $136 million.

FibrLink bills itself as "an integrated provider of solutions and services that support the internet and other public and private data, voice, and multimedia communications networks, using terrestrial and wireless technologies".

It is a subsidiary of the mainland's largest electricity grid builder, State Grid Corp of China.

Market sources said the GEM candidate had submitted a listing application and picked Sun Hung Kai Securities as its sponsor. Sun Hung Kai and FibrLink did not comment.

Since the internet bubble burst some years ago, companies raising large sums through GEM listings have become rare.

"State Grid has long been talking about an overseas listing and most probably that would be Hong Kong. The group doesn't want to have two H-share companies both listed on the main board," said a source close to the planned listing.

FibrLink's listing also signalled the first step towards a listing of its parent firm, the sources said.

State Grid is a nationwide electricity grid builder that transmitted 32 billion kilowatt-hours of electricity across different regions and provinces in the first half.

The company completed a major power transmission project recently to link the northwest and central China grids, a significant step forward in connecting the six provincial grids managed by State Grid and China Southern Grid.

Based on State Grid's huge electricity grid network, FibrLink plans to expand its power-line communication services nationwide after those it started in Beijing, Shandong, Jiangsu, Sichuan and Guangdong.

According to a CCID Net survey, more than 13,000 mainland families used power-line broadband services by the end of August last year. Fierce industry competition has forced FibrLink to price its service package aggressively at 800 yuan a year to secure market share.

Hong Kong to relaunch public property sale by end of 2005
Tuesday September 6, 2005

HONG KONG (AFP) - The Hong Kong government is to relaunch a property privatisation scheme by the end of the year after seeing off a legal challenge which had delayed the original plan.

"We will issue the offering circular in November and we hope to relaunch this by the end of this year," Walter Chan, chairman of the Housing Authority Supervisory Group on Divestment told reporters following a special meeting.

In July, the territory's highest court ruled against 67-year-old welfare recipient, Lo Siu-lan, who had sought to halt the three-billion US dollar sale of publicly owned shopping centres and car parks.

She argued the sell-off through a Real Estate Investment Trust (REIT) undervalued the assets and would likely force up rents for public housing tenants like herself.

Lo took the case to two lower courts, forcing the government to shelve the listing originally planned for December 2004.

Chan said the government's plan to sell 180 shopping malls and 79,000 car parking spaces in public housing estates to private investors would now go ahead unchanged.

Previous interest in the stock exchange listing of the REIT was huge, with the 10 percent of units offered for public sale oversubscribed 130 times.

Analysts had said the series of court cases could dampen interest in the listing but the recent strong recovery in the property market should ensure it gets a positive response.

Malaysia's Lion unit eyes US$180m from share sale
Wednesday, September 07, 2005

The China retail unit of Malaysian property developer, retailer and brewer Lion Diversified Holdings may raise up to US$180 million (HK$1.4 billion) in its Hong Kong IPO, a source familiar with the transaction said.

Lion plans to sell up to 30 percent in its wholly-owned Parkson Retail Group unit in an initial share sale on the main board of the Hong Kong Stock Exchange, the source said. The listing is targeted for November and values Parkson at up to US$600 million, the source added.

An around 10 percent stake up for sale will be in the form of existing shares that Lion Diversified already owns, and may net the company up to US$60 million from the sale, the source said. The remaining 20 percent stake will be in new shares, with the proceeds of as much as US$120 million going to Parkson to expand and upgrade its stores in China, the source said. Lion's Hong Kong-based spokeswoman, Wendy Yeung, declined to comment.

French bank BNP Paribas is the sole bookrunner on the sale. Malaysia's AmInvestment Group is the lead local adviser.

In the six months to end-June, Parkson posted pro forma net profit of 135 million yuan (HK$129.6 million), Lion said in a statement last month. Parkson's net tangible assets are about 707 million yuan, as of last month, Lion said.

REUTERS

Bridge loan likely for Link relaunch

Soaring property values may force the government to take out a loan to keep the Link Real Estate Investment Trust affordable for retail investors, sources familiar with the relaunch strategy say.

Raymond Wang and Tim LeeMaster
Hong Kong Standard
Wednesday, September 07, 2005

Soaring property values may force the government to take out a loan to keep the Link Real Estate Investment Trust affordable for retail investors, sources familiar with the relaunch strategy say.

An application to relaunch the Link REIT IPO was filed Tuesday, increasing the prospects of a November listing.

Last year, before a housing estate tenant's suit temporarily derailed the listing, Link REIT's assets were valued at HK$30.8 billion. But now some analysts estimate their worth at nearly HK$34 billion, reflecting a 10 percent rise in the past year in rents for Housing Authority retail units.

Sources say the higher valuation presents a problem for the government, which would prefer not to raise the price of Link REIT shares, which were offered at HK$10.83 last December. Because of a yield of up to 6.85 percent that was considered extremely generous at the time, the retail portion was 130 times oversubscribed, prompting the government to allocate 56.5 percent of the shares to small investors, instead of 10 percent as first planned.

To cover the increase in the value of the assets since December, bankers underwriting the relaunch hope to arrange a bridge loan. The loan is seen being priced at an ultra-low 15 basis points over the benchmark Hong Kong interbank offered rate, reflecting Link REIT's government backing.

A bridge loan is a form of short-term financing for a transaction to be completed, but which must be promptly replaced with longer-term debt. As the owner of the authority's 151 shopping centers and 79,000 parking spaces, Link REIT should have no trouble finding better-than-average terms on future loans as well.

The Link REIT offer is being underwritten by UBS, Goldman Sachs and HSBC, which are prepared to provide the bridge financing.

JPMorgan is advising the government.

On Tuesday, the Housing Authority filed an application for Link REIT's initial public offering with the Securities and Futures Commission, said Secretary for Housing, Planning and Lands Michael Suen after meeting the officials in charge of the listing.

The offering prospectus will probably be published in November, according to a Housing Authority committee member.

Suen said the possibility of legal challenges to the relaunch could not be ruled out, but he promised the government will be legally better prepared this time, making all of the necessary disclosures in the prospectus.

"I think everyone appreciates that after the experience last year, we have consulted very widely the legal fraternity both here and in London about the risks that we might face in this relaunch," he said. "So after very careful consideration of all of the different risks involved, we believe that we can overcome that by making suitable disclosure."

September 8, 2005
Government Press Release
Mainland stock trading in HK mooted

With many Mainland enterprises already raising funds in Hong Kong, the idea of allowing Mainland investors to trade Mainland stocks floated here one day may not be far-fetched, Monetary Authority Chief Executive Joseph Yam says.

In his latest Viewpoint article, Mr Yam said Hong Kong has been the prime location for Mainland enterprises to raise funds, thanks to the marketing efforts made by Hong Kong Exchanges & Clearing and the Mainland's policy in supporting the city's role as an international financial centre.

Maintaining position

While these favourable factors will underpin Hong Kong's position as the preferred platform for Mainland financial intermediation, Mr Yam said they may not be adequate for that position to be sustained.

"We in Hong Kong are of course happy to get the business in the meantime, but we have to understand that this is due to the underdevelopment of the capital market on the Mainland, which may not be permanent" he said.

"I can see a risk for the sustainability of our role as the platform for Mainland financial intermediation if a channel is not found quickly to allow Mainland investors access to the shares and bonds issued by Mainland enterprises in Hong Kong."

Complex matter

Mr Yam said the design of such a channel is a complex matter, involving currency exchange and capital control issues, but it is not impossible.

"Currency exchange should not be an insurmountable issue given the initial public offerings in Hong Kong have generated an inflow to Mainland enterprises in the first place and this will only be partly offset by capital outflow if Mainland investors are somehow given access to the shares.

"In any case, the channel can always be designed in a manner which allows the flow to be monitored and if necessary controlled to address any concerns."

Techtronic plans $1.8b share offering
Wong Ka-chun, Hong Kong Standard
Friday, September 09, 2005

Techtronic Industries, a power-tool and vacuum-cleaner manufacturer, is seeking to raise as much as HK$1.87 billion through a share placement, sources familiar with the situation said.

The money would be used to pay down debt and fund a planned acquisition.

Techtronic hopes to sell 96 million new shares for between HK$19.20 and HK$19.50 each, a discount of 3.5 percent to 5 percent to the HK$20.20 the stock fetched Thursday before trading was suspended. Earlier in the day, Techtronic stock reached a record high of HK$20.30.

If demand warrants, the sale could be increased to 108 million shares, sources said. HSBC and Merrill Lynch are handling the transaction.

"The share offering is to finance a strategically important planned acquisition," Techtronic chairman Horst Pudwill told Bloomberg, though he declined to name the target company. Some of the money will also go to pare down existing debt, according to the sale document.

The company borrowed heavily to fund its January acquisition of the power tool businesses of Swedish compressor maker Atlas Copco's Milwaukee and AEG for US$713 million (HK$5.56 billion).

Its debt-to-equity ratio soared to 119 percent as of June 30, a figure it hopes to reduce to 30 percent by the end of next year thanks to the strong positive cashflow from the recent acquisitions.

Techtronic shares have gained 19 percent so far this year, compared to the 6.6 percent gain in the benchmark Hang Seng Index.

In addition to making products for sale under its own brand names, Techtronic is a contract manufacturer of the Craftsman tool line for Sears Roebuck, as well as for Bosch, Baush & Lomb, Philips and Colgate.

HK Warrants Market Takes Probe In Stride
Friday September 9, 5:05 PM

HONG KONG (Dow Jones)--Hong Kong's bustling covered warrant market appeared to brush off news that regulators plan to investigate some "suspicious" trading in the volatile financial instruments and review the rules that govern them.

Covered warrants valued at HK$3.7 billion changed hands Friday, representing 22% of total activity in the entire stock market, said Winston Choi, director of retail equity derivatives at warrant issuer BNP Paribas.

That was exactly in line with Thursday's ratio. "There's still a lot of activity, people still believe in the market and warrants," said Choi.

The benchmark Hang Seng Index ended almost flat at 15,165.77 points.

The city woke up to banner headlines on newspaper front pages Friday that the Securities and Futures Commission or SFC, which oversees Hong Kong's financial markets, was stepping in after a series of public complaints that warrant prices were being manipulated, with some reports pointing the finger at investment banks that issue them.

Some angry investors even set up a Chinese-language Web site as a lightning rod for gripes by Hong Kong's retail investing public which has become addicted to short-term trading in warrants. The instruments give the right - but not the obligation -- to buy or sell a stock or index at a set strike price at a defined date in the future.

The regulators said in a statement: "The SFC has commenced a review of the regulatory framework of the derivative warrants market in Hong Kong," adding that it was probing "specific instances of suspicious activities relating to the trading of derivative warrants".

Hong Kong Exchanges & Clearing Ltd. (0388.HK) Chief Executive Paul Chow added that two weeks ago the exchange had referred some "potentially problematic cases regarding trading irregularities in warrants" to the SFC.

Moves of 10% in a day are common for warrants which can magnify the moves of their underlying securities.

Trading in warrants has often made up a quarter of all activity in the stock market in recent weeks and issuing investment banks, including France's SG Securities and Australia's Macquarie Equities, regularly sponsor investor seminars and radio and TV shows to promote their products.

Besides investors, more and more banks are rushing to join what has been a lucrative sideline, with HSBC (0005.HK) and UBS just this week launching new stables of warrants. But a recent sharp pullback by the Hang Seng Index from a four-year high of 15,449 on August 17 has burned a few fingers and fanned a rising tide of complaints that some issuers engaged in devious practices.

Among them are claims that banks have suddenly issued more units of a particular warrant driving down its price so they avoid having to pay out investors. Other complaints have suggested that the heavy trading needed by banks to hedge their warrant issues was destabilizing the market or interfering with the movement of underlying stocks.

News reports also said that the SFC would investigate allegations that investment banks or the smaller brokerages that act as warrant market makers had created some false trading to lure in retail investors to a particular warrant.

Retail investors sometimes choose to play a particular warrant because of heavy volume, seeking to ride momentum, rather than selecting an issue because of its particular characteristics in terms of strike price and maturity.

Executives at warrant issuers said it might be weeks or months before there was any outcome from the SFC's review and investigations and they were prepared to offer suggestions to improve the market.

"We welcome the SFC to do whatever they think is good for investors, we are ready to work with them. If the SFC finds everything is fine it will help strengthen confidence in the market." said Edmond Lee, a senior vice-president in equity derivatives at leading warrant issuer SG Securities.

Some sources in the warrant market doubted that big name banks would overstep the mark and risk their licenses by orchestrating false trading in the instruments. But they said it was possible that smaller brokers might have been tempted to engage in malpractice as some banks pay them in rebates for offering commission-free warrant trading.

Among the rules which might be introduced would be a ban on the reissuing of particular warrants and caps on the amount of warrants that can be issued on each stock. Some believe freewheeling Hong Kong was unlikely to rein in warrants trading and the fuss would die down soon.

"It's not something we are worried about. The market has got so large that it is usual that the authorities will keep a close eye on it," said a European bank executive.

Chinese-language Web site: www.warrant88.com

HKEx rules out warrant cap
Enoch Yiu
15 September 2005
South China Morning Post

Hong Kong Exchanges and Clearing has rejected calls to tighten regulations on derivative warrants by capping the number of issues.

"The board of directors considers it should be the supply and demand in the market that determines the volume of derivatives warrants issues," chief executive Paul Chow Man-yiu said yesterday. "It is inappropriate for the regulator to set a cap on the issue of warrants as this may distort the real demand and may lead to more potential manipulation."

Regulation of derivatives warrants has been a hot subject of debate in the market after the Securities and Futures Commission last week announced it was investigating alleged manipulation by some issuers and brokers and would review warrant regulation.

Some brokers have called for a cap to prevent excessive hedging activities affecting market stability but Mr Chow said such a move could cut warrant supply, push up prices and create volatility.

Chris Cheung Wah-fung, chairman of Hong Kong Securities Professionals Association, disagreed. "The regulators should cap the number of warrant issues to prevent the market being flooded. A large number of derivative warrants have led to many hedging activities and hence led to a very volatile market," he said.

But Peter Wong Shiu-hoi, group managing director of Tai Fook Securities Group, backed the exchange's decision.

"If there are any manipulations in the market, the regulators should investigate and crack down on misconduct," Mr Wong said.

"However, it is not appropriate to bring in tough regulation on the warrants market just because some are being naughty."

Meanwhile, the exchange board yesterday approved a 15-year employees' share award scheme to replace the share option scheme introduced in 2000.

The new scheme will allow the board to award shares from now until September 13, 2020 to selected staff totalling 31.87 million shares, or 3 per cent of the HKEx's issued share capital.

No one could get more than 10.62 million shares, or 1 per cent of issued share capital.

Employees will not have to pay for the shares, unlike the current scheme where staff are entitled to buy the shares at a certain price.

Carmaker joins IPO fray

Dongfeng Motor Corp, a state-run automaker based in Hubei province, has applied to the Hong Kong stock exchange for a listing before the year-end, which may compete with two larger initial public offerings from China Construction Bank and Hong Kong Link REIT, market sources said.

Hong Kong Standard Staff reporter
Monday, October 03, 2005

Dongfeng Motor Corp, a state-run automaker based in Hubei province, has applied to the Hong Kong stock exchange for a listing before the year-end, which may compete with two larger initial public offerings from China Construction Bank and Hong Kong Link REIT, market sources said.
Dongfeng, which previously announced plans to raise US$500 million (HK$3.9 billion) from the IPO, hopes to list its shares in November, a source said. "It is unclear whether the size will be scaled back," he added.

Merrill Lynch, Deutsche Bank and China International Capital Corp are acting as joint sponsors of the deal.

"It may find the market difficult at a time when two big IPOs are also raising funds," the source said. "China's auto industry is also a concern."

Dongfeng, which originally planned to list its shares in Hong Kong by the end of 2004, delayed the deal to mid- 2005 and then to the final quarter this year amid weak sentiment in China's car industry, sources said. Its first target was to raise US$1 billion.

Mainland carmakers have been crimped by price competition, rising raw material costs and high fuel prices which discourage sales.

Hong Kong-listed mainland carmakers, including Geely Automobile Holdings, Great Wall Motor and Qingling Motors, reported lower first- half earnings, while Brilliance China Automotive Holdings reported a 300 million yuan (HK$287.64 million) loss, prompting it to slash its full-year sales target.

The weakness of several auto stocks may hinder investors' interest in Dongfeng as well. Shares of Great Wall and Brilliance have slumped by about 25-26 percent so far this year, while AviChina Industry & Technology has plunged 39 percent.

Also, funds in the market are likely to be drawn to the mega IPO from China Construction Bank, which could raise up to US$7.7 billion, and Hong Kong Link REIT's US$3 billion IPO, which could be launched in November, sources said.

Another carmaker seeking a listing, Shanghai Automotive Industry Corp, and Shanghai-based tiremaker GiTi Tire are unlikely to list shares this year, sources earlier said.

Dongfeng, which partners with Japan's Honda Motor and Nissan Motor and France's Peugeot Citroen in China, fell to No3 in the country by unit sales last year, being taken over by Chang'an Motor Corp and Beijing Automotive Industry Corp.

The firm reported 93.2 billion yuan in turnover last year, up 17 percent over 2003. Its sales rose by a meager 7 percent year-on-year to 523,000 vehicles last year, while net profit was 4.22 billion yuan last year, according to China Daily reports.

SAR leads region in loans and bond issues
Hong Kong led the Asia-Pacific region's loan and bond markets, excluding Japan and Australia, in the first three quarters, according to Thomson Financial.

Lee Yuk-kei and Tim LeeMaster
Hong Kong Standard
Tuesday, October 04, 2005

Hong Kong led the Asia-Pacific region's loan and bond markets, excluding Japan and Australia, in the first three quarters, according to Thomson Financial.
Borrowings by Hong Kong companies jumped 20 percent year on year to US$17.3 billion (HK$134.94 billion), accounting for almost a quarter of the region's total borrowings of US$72.7 billion in the period. Total loans in the region increased 15 percent.

Citigroup tightened its hold at the top of the region's loan-arranger league, boosting its market share in the period by 3.7 percentage points to 11.5 percent, while arranging loan proceeds worth about US$8.4 billion. HSBC ranked second, with US$4.2 billion of loans, followed by Calyon at US$3.8 billion.

Hong Kong dollar bonds led the Asia-Pacific bond issuance league, accounting for nearly US$14.1 billion, or 25 percent of the market, where total bond proceeds in the first three quarters rose 3.1 percent.

JPMorgan head of syndicate Fergus Edwards said there is still strong demand for high-yield bonds, which he cited as driving the increase in Asian bond issuance volumes.

China is still the region's most important market for raising equity capital and for mergers and acquisitions.

Mergers and acquisitions involving Chinese firms surged 70 percent from a year earlier to US$24.4 billion, compared with a 68.7 percent rise across the region. "Newer trends have been the level of financial institutions activity in China and Taiwan, and the emergence of large transactions in the energy sector," said Rohit Sipahimalani, managing director and co-head of M&A for Morgan Stanley in Asia Pacific.

China National Petroleum Corp International's proposed US$4 billion takeover of Calgary-based PetroKazakhstan was the largest acquisition in the first nine months, while the US$4.2 billion borrowed to carry it out was also the biggest loan in the period.

China remained the most attractive place to find companies wanting to make equity offerings, though proceeds declined 27.7 percent to US$12 billion from US$16.6 billion raised in the year- earlier period. Beijing-based China Shenhua Energy was the largest initial public offering in the region in the first nine months, raising US$3.3 billion before a Hong Kong listing.

Furniture giant eyes US$500m
Taisheng Furniture, Asia's largest furniture exporter, plans to raise US$300 million to US$500 million (HK$2.34- HK$3.9 billion) in a Hong Kong initial public offering in mid-November, according to market sources.

Lee Yuk-kei
Hong Kong Standard
Wednesday, October 05, 2005

Taisheng Furniture, Asia's largest furniture exporter, plans to raise US$300 million to US$500 million (HK$2.34- HK$3.9 billion) in a Hong Kong initial public offering in mid-November, according to market sources.
The company, which is owned and operated by Taiwanese investors, has captured a growing share of the US market for high-end furniture.

US furniture makers have been shutting factories and slashing prices to meet mounting foreign competition, especially from the mainland. Customs figures show China's furniture exports soared 39.3 percent in 2004 from year- earlier levels to US$10.35 billion. Morgan Stanley is arranging the sale.

Taisheng, which began operations in 1980 in Guangdong, now has factories in Dongguan and Zhejiang employing more than 6,000 workers that can turn out 200 million furniture sets a year. In 2001, it became one of the first Asian furniture manufacturers to sell goods under its own brand name after it purchased US retailer, Universal, which had US$400 million in annual sales.

China's furniture makers, who initially focused on the less-profitable market for cheaper goods, have been moving upscale in recent years, with Taisheng in the vanguard.

Now, even relatively high-end US manufacturers - such as Ethan Allen Interiors and the country's biggest producer, Furniture Brands International - are feeling the heat. Both have closed factories, fired staff, and cut prices in recent months as their share prices dived. "This shows how competitive the mainland manufacturers are," one source said.

In an effort to stem the import tide, US manufacturers asked the government to impose anti-dumping duties in 2004, a move Taisheng, joined by nearly 80 other Dongguan-based furniture makers, resisted. Ultimately, China's furniture exports were hit with an average import tariff of 8.64 percent - and Taisheng an even lower 6.95 percent.

China's furniture industry was one of the first opened up for foreign investment when China began liberalizing its economy, an opportunity quickly seized by companies from Hong Kong, Macau and Taiwan. The Taiwanese have been especially active and now operate more than 500 mainland furniture plants.

Taisheng originally planned to sell shares in Taiwan, but opted instead for Hong Kong in order to achieve wider exposure to international investors.

The sale comes as another mainland furniture maker, Zhejiang Kasen Industrial, is also seeking to sell shares in Hong Kong. It was forced to cut the planned size of its offering by a quarter to US$150 million in the face of tepid investor interest.

Bankers reckon Taisheng will get a better reception. Kasen only makes goods under contract for sale using other companies' brand names, a less lucrative business.

Leather products giant plans $958m IPO
Kasen International Holdings, China's biggest leather products manufacturer, wants to raise as much as HK$958 million with an initial public offering, with half the net proceeds to go to repaying loans, according to its preliminary sale document.

Gladys Tang
Thursday, October 06, 2005

Kasen International Holdings, China's biggest leather products manufacturer, wants to raise as much as HK$958 million with an initial public offering, with half the net proceeds to go to repaying loans, according to its preliminary sale document.
The Zhejiang-based company plans to sell 304.2 million shares at between HK$2.55 and HK$3.15, or 10.3 to 12.8 times its forecast 2005 earnings.

Of the total shares on offer, 66.7 percent are for sale by existing shareholders. Founder and chairman Zhu Zhangjin will reduce his holding to 32.43 percent from 40.54 percent.

Apart from repayment of short-term loans, about 40 percent of net proceeds will fund capital expenditure and the balance will be kept for working capital.

"The stock is not attractive due to its high debt ratio," said an analyst who attended the company's presentation.

Total loans were 1.68 billion yuan (HK$1.61 billion) as of the end of April, with a debt-to-equity ratio of 1.53 times, the pre-sale document indicated.

Kasen intends to pay about 25 percent of profit to shareholders in 2005. The payout ratio in the following years is set at about 30 percent.

The company makes leather products related to household and car furnishing under clients' names. Each of Kasen's two largest customers - Furniture Brands International and Berkline/Benchcraft - accounts for 33 percent of the company's sales.

During the first four months of this year, upholstered furniture made up 77 percent of total turnover of 983.1 million yuan, and the company expects this segment to continue to be its earnings driver.

Kasen has an annual capacity of 9.5 million seats for its upholstered furniture and furniture covers.

Automotive leather, which contributed 4.8 percent to turnover, is sold to General Motors, Volkswagen, Ford, Audi and Mazda.

The remaining segment, uncut furniture leather, contributed 18.2 percent of turnover during the first four months.

Seeking to diversify the product mix, the company has invested US$100,000 (HK$780,000) for a 50 percent stake in Kasen-Melx, a venture with Japan-based Melx, to develop a footwear leather business.

The venture also serves as a stepping stone to the Japanese market. The US and China are Kasen's present leading markets, accounting for 74.7 percent and 21.8 percent of turnover, respectively, in the first four months.

Profit will rise 10.9 percent to at least 260 million yuan this year, from 234.5 million yuan in 2004, the company said. Turnover increased by 33.6 percent to 2.8 billion yuan last year.

A surge in cost of sales reduced its gross profit margin to 16.3 percent at the end of April, from 16.7 percent a year earlier.

The listing candidate's shares will begin trading October 20 under the stock code 496. UBS is the sole sponsor, bookrunner and lead manager.

Kasen prices IPO at low end
Kasen International Holdings, the mainland's top leather products and furniture manufacturer, priced its initial public offering at the bottom end of its indicated range, raising HK$775 million after a tough sell to retail investors, people close to the deal said.
Tim LeeMaster and Alman Loong
Hong Kong Standard
Monday, October 17, 2005

Kasen International Holdings, the mainland's top leather products and furniture manufacturer, priced its initial public offering at the bottom end of its indicated range, raising HK$775 million after a tough sell to retail investors, people close to the deal said.

The company sold 304 million shares at HK$2.55 per share, the lowest end of an indicative range that had HK$3.15 at the top end.

"The retail side was a disappointment," a person familiar with the situation said. "There wasn't a great response with the deal just or just under covered."

The institutional tranche was only 1 times covered.

The stock market's downward trend and the poor performance of recent mainland IPOs, including those of China Paradise Electronics Retail and Yurun, dampened investor sentiment.

Home appliance retailer China Paradise Electronics Retail bucked the weak trend by closing 5.55 per cent higher at HK$2.37 in its trading debut Friday.

However, the modest China Paradise gains disappointed some punters who had expected a stronger response from retail investors.

Yurun Food Group rose a scant 2.03 percent in its trading debut near the start of this month even though the HK$1.54 billion offering saw strong demand.

Kasen's offer comes ahead of China Construction Bank's HK$60 billion offer - the biggest Hong Kong listing to date.

The mainland's third-largest lender triggered a buying frenzy among investors when it launched its retail tranche Friday.

Heidi Yang, an executive director with UBS Investment Bank, the sponsor for Kasen's offer, said she was not concerned about the listing competition with CCB.

"The retail offer was partially affected by China Construction Bank's mega offering," one fund manager said. The company's founder and chairman Zhu Zhangjin will reduce his holding to 32.43 percent from 40.54 percent.

Apart from repayment of short-term loans, about 40 percent of net proceeds will fund capital expenditure and the balance will be kept for working capital.

Total debts stood at 1.68 billion yuan (HK$1.61 billion) as of the end of April, with a debt-to-equity ratio of 1.53 times. Of the total shares on offer, 66.7 percent are for sale by existing shareholders. The shares begin trading Thursday.

Dongfeng Motor given the green light for $3.9 IPO
Dongfeng Motor has obtained approval from the Hong Kong stock exchange