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Asia bankers gear up china stock deals { August 28 2003 } Original Source Link: (May no longer be active)
http://reuters.com/financeNewsArticle.jhtml?storyID=3348973&type=newIssuesNewshttp://reuters.com/financeNewsArticle.jhtml?storyID=3348973&type=newIssuesNews
Asia bankers gear up for slew of China stock deals
Thu August 28, 2003 03:44 AM ET
By Brian Kelleher, Asia financial services correspondent
HONG KONG, Aug 28 (Reuters) - Asia's investment bankers are working overtime to arrange a barrage of stock sales from Taiwan and China.
A sharp rebound in U.S. 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 MWD.N 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 percent from 2002, according to market research firm Dealogic.
Hong Kong's bankers, who typicaly charge a 2.5 percent 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 C.N , Merrill Lynch & Co Inc MER.N and Goldman Sachs Group Inc GS.N lead the equity rankings, Dealogic said. Taiwan technology deals, such as Chunghwa Telecom Co's 2412.TW $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 percent 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 MWD.N , CSFB, Goldman, Citigroup, Deutsche Bank DBKGn.DE and HSBC HSBA.L 0005.HK 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 percent for add-on stock offerings and 1.4 percent 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 KTB.BK , cutting its ownership to about 55 percent from 94 percent.
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