China’s enthusiasm for initial public offerings is burning itself out. After 2007 saw Hong Kong and mainland bourses raise US$127 billion in IPOs, firms are finding the markets less excited for new offerings.
The trading debut of China Railway Construction Corp was a typically lackluster occasion. The firm’s A-shares rose 28% for the worst opening day performance in Shanghai since November 2006. In Hong Kong, it posted a 12% gain, the weakest debut since November 2007.
This tepid reaction cast further doubt on the planned share sales of several other companies. China Pacific Insurance delayed its US$4 billion IPO in Hong Kong twice – first in January and then again in March. Meanwhile, Ping An Insurance said it would “carefully weigh” its decision to hold a US$17 billion share and convertible bond sale in Shanghai. Although the transaction received regulatory approval, the company’s remarks were taken as a sign that it would scale back the size of its offering.
A surfeit of large sales had prompted China’s securities regulator in late February to warn companies away from “malicious money grabbing.” The watchdog said listed firms “should consider market conditions, investor sentiment and their own funding needs before deciding the timing and size of refinancing.”
Despite these warnings, not all is gloomy on the IPO front. Evergrande Real Estate’s US$2.1 billion IPO in Hong Kong is still on track for April. If all goes to plan, Xu Jiayin, the firm’s owner, may end up topping China’s rich list.