China Railway Construction has raised a total of US$5.4 billion through its dual initial public offering in Hong Kong and Shanghai, according to numbers sent out this afternoon by Thomson Financial. This sends China back to the top of the global IPO pile, with US$6.8 billion raised from 23 offerings so far this year.
India is now in second place, US$2.9 billion of its cumulative US$3.6 billion having come from Reliance Power’s listing in late January. The US, which had raised US$6.1 billion from 20 offerings this time last year, is trailing on US$808 million (from six offerings) – a sign of the times if ever there was one.
In Hong Kong alone, China Railway Construction’s shares have gone for US$2.3 billion and it was reported that the retail portion of the offering was at least 250 times oversubscribed. We will have to wait until March 13 to see whether this strong retail interest could signal the start of a turnaround in the Hong Kong market, which has fallen more than 25% from its October peak.
Jonathan Anderson, emerging markets economist at investment bank UBS, offered some sobering thoughts on this topic in a research note sent out today: “Of course both domestic A-shares and Hong Kong-listed H-shares have seen the largest net decline of any market in Asia since late 2007, but according to our Asian equity strategy team’s valuation metrics, this has simply brought China down from the most expensive market in the region to the fourth-most expensive.”
As it happens, China Railway Construction may not hold the IPO of the year crown for very long. Credit card processor Visa is said to be planning to raise as much as US$18.8 billion in a listing that, if successful, would be the second largest in history and defy the current climate of tight credit.
It is the banks that use Visa, rather than the company itself, that carry the burden when people default on credit card payments. These same banks also have stakes in Visa so they will hope to profit from the IPO and use the proceeds to, you’ve guessed it, offset losses resulting from people defaulting on subprime mortgage payments.