CICC Launches IPO in Hong Kong

China’s oldest domestic investment bank launched its initial public offering in Hong Kong on Monday boosted by last week’s news that the Chinese government will resume IPOs on the mainland market.

CICC22China International Capital Corp’s (CICC) $811 million IPO was priced at the top of its expected range, 10.28 Hong Kong dollars. The shares jumped 9.6% in their debut to HK$11.38. Investors enthusiasm was based on Friday’s decision by China’s securities regulators to end the four-month halt on IPOs, assuming that CICC will underwrite many of the new issues and thus receive a large bump in revenues.

In the wake of the rout on the Chinese Stock Market this past summer, the authorities stopped the launch of all IPOs that had filed to go public. The thinking was that if money keeps going to IPOs it takes away money that could go to buy and support blue chip securities that were in the midst of a severe correction.

But the return of the IPO market reflects a turnaround in Chinese equities. China’s stock market officially rebounded into bull market territory last Thursday. The Shanghai Composite Index has gained 20.3% since Aug. 26, the bottom of the summer selloff. A bull market is defined as a rise of 20% from a recent low.

“The timing of the reopening had been a closely monitored exercise by the market. There are hundreds of companies keen to go public,” Ringo Choi, Asia-Pacific IPO leader at consulting firm EY in Hong Kong told Reuters. “This is a milestone for them, showing that the market has stabilized.”

The bank was established in 1995 as a joint venture between China Construction Bank, Singapore sovereign wealth fund GIC and Morgan Stanley, according to Reuters. CICC will use the funds raised from the IPO to expand equity sales and its trading and wealth management businesses, as well as international subsidiaries.

Global private equity firm KKR & Co and TPG Capital Management is among its shareholders.

Reuters said domestic investment banks like CICC, CITIC Securities and Haitong Securities are likely to be the biggest beneficiaries from the resumption of IPOs in Shenzhen and Shanghai.

Currently underwriting IPOs and other equity deals accounts for about half of the revenues at investment banks’ in Asia, compared with 20% in the US and 19% in Europe.



Categories: Asia Unhedged, China

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