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Friday, August 29, 2003

Asia bankers gear up for slew of China stock deals

Reuters
Hong Kong, August 28

Asia's investment bankers are working overtime to arrange a barrage of stock
sales from Taiwan and China.

A sharp rebound in US markets has sent Asian stocks soaring and companies
are anxious to sell stock at higher prices, particularly after delaying
deals during the SARS outbreak.

That's good news for bankers, who were twiddling their thumbs until a recent
spate of offerings from Taiwan technology companies blew new life into the
market.

"Issuance is likely to be significantly greater in the remainder of the year
than we have seen in 2003 to date," said Danny Palmer, co-head of Morgan
Stanley's global capital markets team in Asia Pacific. "The market has moved
sharply higher and this is driving the high level of activity."

Asian equity issuance outside of Japan and Australia is $27.4 billion so far
this year, off 23 per cent from 2002, according to market research firm
Dealogic.

Hong Kong's bankers, who typicaly charge a 2.5 per cent fee for initial
public offerings (IPOs), are busy making up for lost time.

"If you want to get deals done by the end of the year, you have to get them
in the bag in the next couple of weeks," said Matthew Kirkby, head of Asian
equity capital markets for ABN AMRO Rothschild.

Citigroup Inc, Merrill Lynch & Co Inc and Goldman Sachs Group Inc lead the
equity rankings, Dealogic said. Taiwan technology deals, such as Chunghwa
Telecom Co's $1.37 billion New York listing in July, have been among the
most numerous.

"While you have seen some heavy activity in Taiwan and technology, you will
see that balancing out," said Marshall Nicholson, head of equity capital
markets for Credit Suisse First Boston Asia, excluding Japan.

"People are pretty excited about China," he said. "Besides (state)
privatisations, you'll see a lot of private companies accessing the public
markets and that should offer some great opportunities."

CHINA INSURANCE

China's economy is expected to grow a government-targeted eight per cent
this year -- despite SARS -- and its fast-growing insurance sector is a hot
spot as the government tries to dismantle its old welfare system.

People's Insurance Co of China, China Life Insurance Co and Ping An
Insurance are all expected to launch initial public offerings that could
raise upwards of $6 billion by early next year. That compares with about $20
billion of IPOs globally so far in 2003.

Morgan Stanley, CSFB, Goldman, Citigroup, Deutsche Bank and HSBC are among
the investment banks arranging the insurance deals, and total fees could be
in the range of $150 million, based on historical averages.

Fees are typically lower in Hong Kong than in the rest of Asia because of
the cut-throat competition for deals. Aross the continent, fees for IPOs
average 3.8 percent of the deal's value, while bankers charge 2.2 per cent
for add-on stock offerings and 1.4 per cent for investment grade debt sales.
Other China IPOs expected for this year include Weiqiao Textile Co, the
country's largest cotton yarn and fabric producer and state-owned
electricity supplier China Resources Power Co.

China companies have raised nearly $7 billion through stock sales this year,
roughly the same as a year ago, Dealogic said.

China investors are focused on transparency of management and respond
favourably to companies that demonstrate strong corporate governance, CSFB's
Nicholson said.

Mainland companies have taken notice.

"Most Chinese companies take an overseas listing very seriously," said
William Liu, a managing director in Citigroup's equity capital markets group
in Asia.

"China companies, especially the large ones, have been remarkably good at
keeping up with investor relations," said Liu.

SOUTHEAST ASIA

In Southeast Asia, governments are steadily selling off stakes in state-run
businesses in privatisation programs.

"You'll see more of those going forward, I think there's a healthy pipeline
in Indonesia, in Thailand and also in Malaysia," said Stephen Metcalfe, a
director in CSFB Asia's equity capital markets group, ex-Japan.

Financial services will be busy, as many Asian governments have been
restructuring state-owned banks since the late 1990s.

"There is still an overhang of government-owned banking paper from the Asian
crisis," said ABN Amro's Kirkby.

One deal in the works is Thailand's plan to sell shares of its largest
state-run bank, Krung Thai Bank, cutting its ownership to about 55 per cent
from 94 per cent.

© Hindustan Times Ltd. 2003.
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