The first dual initial public offering (IPO) in Hong Kong and Shanghai may have to wait.

China's largest coal miner, China Shenhua Energy, and Bank of Communications (BoComms), its fifth largest bank, are unlikely to proceed with the Shanghai portions of their planned IPOs due to a weak domestic market, sources familiar with the deals said.

The two companies, which together aim to raise about US$5 billion, have been vying to be the first from China to go public simultaneously in Shanghai and Hong Kong.

"Given the weak sentiment, it is unwise to go with the dual listing plan," one source close to the Shenhua deal said.

China's domestic shares slid to a 6-year low after Baoshan Iron and Steel (Baosteel), the country's biggest steel maker, sold US$3 billion worth of shares in late April.

Numerous Chinese companies have dual listings on the mainland and Hong Kong, but none has ever gone public simultaneously.

Mainland stocks, known as A shares, typically trade at a premium to their Hong Kong counterparts, although the gap is closing as domestic Chinese markets slide.

Shenhua has approval from the China Securities Regulatory Commission (CSRC) to sell 18 percent of its enlarged equity capital, or about 3.6 billion shares, to overseas investors, and another 7 percent to domestic investors.

But sources said the firm would postpone its domestic offering and seek Hong Kong listing approval at a hearing next week. It is eyeing a mid-June listing in Hong Kong.

China International Capital Corp, Deutsche Bank AG and Merrill Lynch, which are underwriting the IPO, declined to comment yesterday.

Shanghai-based Bank of Communications, which is 19.9 percent owned by global bank HSBC Holdings, previously planned to offer about 20 percent of its enlarged equity in a dual mainland and Hong Kong listing.

Under that plan, HSBC was to buy a further 4 percent stake in BoComms, while 8 percent of the bank would be sold in Hong Kong and another 8 percent in Shanghai.

If BoComms delays the Shanghai portion of its deal, the lender will need to increase the size of the Hong Kong offering in order to meet the city's 15 percent free float minimum for large-cap stocks.

Sources said both listing candidates would finalize their IPO plans next week.

(China Daily May 6, 2005)

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