Two Chinese Firms Seek Multibillion-Dollar IPOs 

China Merchants Securities and China Reinsurance are pursuing Hong Kong listings

Two Chinese financial firms are gearing up for multibillion-dollar initial public offerings in Hong Kong, even as China’s stock markets saw one of their steepest selloffs last month.

China Merchants Securities Co. plans to submit an application to Hong Kong’s stock exchange seeking approval for a multibillion-dollar initial share sale in the coming weeks, two people with direct knowledge of the deal said.

The Shanghai-listed company, China’s sixth-largest brokerage by assets, plans to list in Hong Kong in the fourth quarter. It originally planned to raise about US$4 billion in June. But with China’s stock markets flailing and Beijing tamping down on margin financing, a new fundraising target could be much lower, one person familiar with the deal said.

Despite the volatility in the stock markets, China Reinsurance (Group) Corp., the country’s biggest reinsurer, is also pursuing a Hong Kong listing. China Re submitted an application for its US$2 billion listing to the Hong Kong stock exchange last week and plans to list in the fourth quarter, according to another person with direct knowledge of the deal.

China Re, whose businesses span from life reinsurance to wealth management, has a near monopoly on the domestic reinsurance market. China is also home to a number of smaller domestic firms and global reinsurers, including Munich Re AG, the world’s biggest reinsurer by premium income, and Zurich-based reinsurer Swiss Re AG. The state-owned company has hired China International Capital Corp., UBS Group AG andHSBC Holdings PLC to handle the listing, according to its primary listing prospectus.

On Friday, state-owned China Railway Signal & Communication Corp., which makes signal systems used in China’s rail network, raised US$1.42 billion after pricing its Hong Kong IPO at the lower end of an indicative price range.

Investor appetite for IPOs has been hurt by slumping Chinese stock markets. In July, the Shanghai Composite suffered its worst month in nearly six years, showing a lack of confidence in Beijing’s ability to stem the selloff that began in mid-June. The Shanghai Composite Index lost 14% in July, while the Hang Seng Index lost 6%.

China Merchants disclosed plans to go public in Hong Kong in May in a filing to the Shanghai Stock Exchange. It said it planned to issue up to 1.2 billion shares but gave no additional details.

The brokerage has picked its own investment-banking unit, China Merchants Securities (HK) Co., as well as J.P. Morgan Chase & Co. and Morgan Stanley, to handle the IPO, the people said.

Last year, China Merchants posted a net profit of 3.9 billion yuan ($628.3 million), up 73% from a year earlier, buoyed by gains in commission income and wealth management.

 

Source: WSJ – Two Chinese Firms Seek Multibillion-Dollar IPOs

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