As Asian Economies Heat Up, Companies Rush to Raise Equity, Producing Record Wave of IPOs
Platt, Gordon, Global Finance
CORPORATE FINANCING FOCUS
Industrial & Commercial Bank of China s $21.9 billion stock issue on October 27 was the world's largest initial public offering ever and brought the year-to-date total for Asian equity issues outside of Japan to $141 billion, the largest total on record for the region and a 30% increase from the same period a year earlier.
China, with its fast-growing economy, accounted for 41% of Asia-Pacific volume, excluding Japan, with $58.5 billion of equity issues in the first IU months of 2006, a 97% increase from 2005's year-to-date total, according to Dealogic, which tracks data on the global capital markets. IPO volume for the Asian region increased 71% to $65 billion from $38 billion a year earlier.
ICBC, China's largest bank by assets, listed its shares simultaneously in Shanghai and Hong Kong, marking the first time that has ever happened.The total offering for a 15% stake in the bank surpassed the previous record IPO of $18.4 billion set by Japanese mobile phone operator NTT DoCoMo in 1998.
Displaying an unusually large gain for an issue of its size, ICDCs shares rose 15%) on their first day of trading on the Hong Kong Stock Exchange. The remarkable rise was fueled by strong demand from both retail and institutional investors. The rise came on a day when Hong Kong's benchmark Hang Seng index actually closed lower. In Shanghai, ICBC's domestic shares-otherwise known as Ashares-rose a more modest 5.1% from their IPO price, as the record $5.9 billion issue drained liquidity from the market. Merrill Lynch, China International Capital, ICEA Capital, Credit Suisse and Deutsche Dank were joint bookrunners for the Hong Kong share offering. About 75% of the IPO was sold to Hong Kong and global investors, and the remainder in Shanghai. ICBC exercised its so-called greenshoe option for the Hong Kong portion to issue additional shares to meet the extra demand.
Investors Line Up in Hong Kong
Despite a history of bad loans and poor management, China's banks have appealed to investors, who lined up in Hong Kong to buy shares in the biggest financial institutions on several occasions this year. The retail portion of ICBC's offering was nearly 300 times oversubscribed. ICBC received a $15 billion capital injection from the Chinese government last year to help it whittle down its mountain of non-performing loans to make it presentable for a public offering.
ICBC has more than 18,000 branches across China, a country of more than 1.3 billion people with a savings rate of 50%. The country's banking sector will open to competition from foreign banks at the end of this year as part of an agreement with the World Trade Organization. ICBC was the third big state-owned commercial bank to list its shares. China Citic Bank plans to raise $2 billion by early 2007.
South Korea's largest department store chain. Lotte Shopping, raised $.5 billion in its IPO in February, including $2.8 billion in global depositary receipts. The GDR issue, which was listed on the London Stock Exchange, was the largest DR capital raising in history, according to Citigroup, which was appointed as depositary for the global IPO. The previous record was held by Chunghwa Telecom of Taiwan, which raised $2.6 billion in American depositary receipts in 2005.
Lotte Shopping offered 30% of its total shares in a simultaneous IPO, with common shares listed on the Korea Exchange and GDRs offered in London. In addition, the company placed some global depositary shares in Japan under a public offering without listing, or POWL, facility.
Capital raised worldwide in the form of depositary receipts by non-US companies totaled $11.8 billion in the first half of 2006, according to Citigroup. This was the second-highest first-half total ever, following the $17.1 billion record in the first six months of 2000. Asian-based companies raised $6.7 billion in the form of depositary receipts in this year's first half, up 24% from the same period of 2005, and accounted for 57% of worldwide DR capital raised. …