Official approval for the Industrial and Commercial Bank of China's (ICBC) simultaneous listing in Shanghai and Hong Kong established a new model for Chinese companies to go public, experts said yesterday.

 

The new "A+H" model means a company can issue A shares on the Shanghai bourse and H shares on the Hong Kong stock market at the same time. It is the first time a mainland company has listed under this model.

 

"The 'A+H' model will help the domestic bourse have much more connection with the Hong Kong stock market, and domestic investors should be more rational when buying stocks instead of (it being) a speculative motive," She Minhua, a banking analyst with CITIC China Securities, said.

 

The time for simultaneous domestic and overseas listings is ripe as the domestic bourse revives from its five-year slump, rising to a bullish market. The legislation for public companies is also more in line with the international norm.

 

China enacted its new securities and company laws at the start of the year, and the benchmark Shanghai index has gained 45 percent since.

 

The securities regulator resumed domestic initial public offering (IPO) activities in May after a year-long ban. Five companies, including Bank of China (BOC), have raised 23 billion yuan (US$2.9 billion), compared with 5.7 billion yuan (US$712 million) for all of 2005.

 

"The ICBC, as the country's biggest lender that represents the country's rapidly growing economy, will be set as a model for other companies to follow as the country's stock market starts to lift," She said.

 

The bank's Hong Kong IPO is expected to raise more than US$12 billion, while the Shanghai listing will raise at least 20 billion yuan (US$2.5 billion).

 

The government scrapped its earlier aim of simultaneous dual listings last year both for Shenhua Energy and the BOC as the securities reform was still at an early stage and the stock market was in a slump.

 

But with the BOC easily raising 20 billion yuan (US$2.5 billion) in the mainland's biggest IPO to date only a month after its Hong Kong listing, bankers believe such a deal is timely.

 

"The BOC's IPO price proved that there is basically no gap between the price of H shares and A shares, which makes it much more easy for investors to accept the 'A + H' model," She said.

 

But completing the transaction is considered complicated, especially as the mainland's yuan currency is not freely convertible.

 

Further, the Hong Kong and Shanghai exchanges have different application procedures. The deal will also require two sets of investment banks, adding to the risk.

 

The bank has selected four local underwriters for its A-share listing, including the China International Capital Co (CICC), CITIC Securities Co, Shenyin & Wanguo Securities Co and Guotai Jun'an Securities Co.

 

It appointed Credit Suisse, Deutsche Bank, Merrill Lynch, ICEA and a consortium led by the CICC to underwrite its Hong Kong share sale at the beginning of this year.

 

(China Daily July 20, 2006)