Provincial firms seen in next wave of IPOs
(Shenzhen Daily/Agencies)
Updated: 2005-12-26 10:57

Bankers are looking ahead to the next wave of initial public offerings (IPOs) out of the mainland following the listing of China Construction Bank Corp. in October and as two of the country's other four largest banks prepare to float shares in Hong Kong in 2006.

The next round of IPOs will be from Chinese provincial banks and natural resources firms, said a senior banker at Softbank Investment E2-Capital, or SBI, an affiliate of Tokyo-based Internet and telecommunications services company Softbank Corp.

"The first wave of big listings will be completed in the next 12 months or so — after that, the focus will be on provincial enterprises," said Ronald Wan, head of investment banking at SBI.

However, because these provincial-level companies are relatively small, many of them will first have to grow to attract cross-border institutional interest in a listing.

"Under the unofficial directives of the government, if a State-owned company cannot become one of the top national players in its field, it is encouraged to merge so that it can compete with international players when China opens up in accordance with WTO requirements," said Wan.

"People want to buy the first, second or third-largest companies in their respective fields in China," he said. "No one's interested in the 20th largest."

China started listing its big State-owned firms with the spinoffs of its oil and gas giants over five years ago. They were followed by spinoffs from its telecommunication firms and insurers.

The overseas listings of China's big banks began in June this year with the IPO of the country's fifth-largest lender by assets, Bank of Communications Ltd.. That was followed in October by the listing of China Construction Bank, the country’s third-largest bank by assets, which raised US$9.2 billion in its IPO, the world’s biggest since 2001 and China's largest ever.

The country's second-biggest lender, Bank of China, is now preparing to list in Hong Kong next year following an IPO that could raise anywhere between US$4 billion and US$10 billion. The public float of Industrial & Commercial Bank of China, China's biggest bank, is expected to follow.