China Construction Bank Will List in Shanghai
It looks like a number of rather large companies will soon list on the Shanghai Stock Exchange. Here’s the situation, translated out of this week’s Modern Weekly:
China Construction Bank to Return to Mainland China
China’s second largest bank, China Construction Bank, will make it’s first offering in mainland China sometime soon. Although China Construction Bank went public in Hong Kong, this listing will raise US$7-8 billion, and might be the biggest initial offering within mainland China to date.
[Financials Driving China’s Stock Bubble]
Among the 15 biggest companies by market value listed on the Shanghai Stock Exchange, 11 are banks or securities firms. The enthusiasm of investors toward China’s financial services industry has been the main driver of the 98% increase of the Shanghai Composite Index this year. But worried about how to cool off the rapidly rising stock markets and avoid a collapse, China’s government has chosen to allow more companies the right to issue stock - satisfying the needs of hungry investors. In the first half of this year 41 companies had IPOs in the Shanghai and Shenzhen stock markets totaling US$17.28 billion in value, with the total for all of 2006 just US$21.62 billion.
More State Owned Enterprises to List in Shanghai
In the next several months, several more state owned enterprises already listed in Hong Kong might make carry out large offerings in Shanghai. Last month, China National Petroleum Corporation was approved to make an offering in A shares on the Shanghai Stock Exchange, which is estimated to total about US$5 billion. China’s largest coal producer, China Shenhua Energy Company Limited, was also approved to make an offering in A shares on the Shanghai Stock Exchange - which will probably add up to US$7 billion. Another group of well known companies seeking to list on the Shanghai Stock Exchange is another vote of confidence in mainland China’s capital markets.
Seeking to list at the possible top of a bubble is not a vote of confidence in capital markets - it is just a means of getting capital at a bargain cost. A real, if often stupid, vote of confidence is to list during the depths of a brutal bear market.
