HONG KONG • Investment bank China International Capital Corp (CICC) rose as much as 11.3 per cent in its Hong Kong debut as China's decision to allow a resumption of initial public offerings (IPOs) boosted the outlook for its business.
The stock was up 10.5 per cent at HK$11.36 as of 11.01 am yesterday, heading for the best performance of a major Hong Kong IPO since April. The Hang Seng Index rose 0.2 per cent at that point.
"Investors are turning positive towards Chinese brokerages," Shanghai-based Capital Securities Corp brokerage analyst Zheng Chunming said by phone. "They are happy that one of the major income sources is back."
CICC, which raised US$811 million (S$1.2 billion), pushed on with its plans for the share sale even as China's stock market was collapsing over the summer. Now, its listing has coincided with a revival in Chinese equities, which rallied into a bull market last week, and China's decision to lift a five-month freeze on IPOs on the mainland.
CICC plans to use the money to expand its equity sales and trading, wealth management and international businesses, according to its prospectus.
"The timing of the reopening had been a closely monitored exercise by the market. There are hundreds of companies keen to go public," said Mr Ringo Choi, Asia-Pacific IPO leader at consulting firm EY in Hong Kong. "This is a milestone for them, showing that the market has stabilised."
"The price of CICC is good, as we expected," CICC chairman Ding Xuedong said at the listing ceremony. Mr Ding is also chairman and CEO of China's sovereign wealth fund, CIC. Established in 1995 as a joint venture between China Construction Bank, GIC and Morgan Stanley, CICC counts global private equity firm KKR & Co and TPG Capital Management among its shareholders.
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, as home-grown firms underwrite the vast majority of those deals. Underwriting IPOs and other equity deals accounts for about half of investment banks' revenue in Asia, compared with 20 per cent in the United States and 19 per cent in Europe.
The CICC share sale comes on the heels of two other large offerings, underscoring an upswing in equity activity that investment bankers are counting on to boost revenue in Asia.
Companies in mainland China had raised US$23.4 billion in IPOs this year through mid-June before regulators suspended deals, far surpassing the US$13.2 billion in all of 2014, data showed.
BLOOMBERG, REUTERS
