China, Russia Compete for Biggest IPO of Year

By Platt, Gordon | Global Finance, October 2007 | Go to article overview
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China, Russia Compete for Biggest IPO of Year


Platt, Gordon, Global Finance


China is likely to have the year's biggest initial public offering for the second year in a row, although there remains a chance that Russia will beat it out. As Global Finance went to press, China Construction Bank planned to begin trading its shares in Shanghai on September 25, following what was expected to be the mainland's biggest IPO ever, at an estimated $8 billion or more.

The bank was the first of China's four big stateowned banks to launch an IPO in Hong Kong, raising $9.2 billion in October 2005. A year later Industrial and Commercial Bank of China netted $5.9 billion from the Shanghai portion of a dual offering that was also listed in Hong Kong and that raised a record total of $21.9 billion.

Despite a recent tightening of global liquidity and increased stock market volatility, Chinese investors still have a voracious appetite for shares. The Shanghai Composite index was up almost 100% year-to-date as of mid-September, after more than doubling in value in 2006.

While the People's Bank of China has been raising interest rates and increasing bank reserve requirements in an effort to restrain the fastgrowing money supply, there still appears to be plenty of liquidity available in China to fund share offerings of this size.

Meanwhile, Russia-based United Company Rusal, the world's largest aluminum producer, has been trying to put together an IPO on the London Stock Exchange (LSE) that could raise $7 billion to $10 billion, which would potentially make it the largest 2007 IPO globally.

Russian firms raised $15.7 billion on the London Stock Exchange in the first half of 2007, accounting for 77% of the LSE's initial public offering business, according to London-based Dealogic. Most of this was in the form of global depositary receipts, which have lower disclosure requirements, rather than direct listing of shares.

Russia-based companies raised $10.4 billion in depositary receipt form in the first half of 2007, an 878% increase over the same period a year earlier, according to an analysis by Citi.

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