China Zheshang Bank has postponed gauging demand for a $1-billion Hong-Kong initial public offering (IPO) after stock buyers reported difficulty transferring money out of the mainland, people familiar with the
Potential cornerstone investors from the mainland told deal arrangers they couldn't get timely regulatory approval to send money across the border, according to the people.
The lender, based in the eastern mainland city of Hangzhou, had originally planned to start so-called pre-marketing of the deal on Monday, the people said.
Any curbs on money outflows could hurt the Hong Kong market, where the amount raised from first-time share sales rose 13 percent last year to $33.9 billion, data compiled by Bloomberg show. Many companies listing in Hong Kong set aside more than half their IPO shares for predominantly mainland cornerstone investors, who typically agree to hold on to their stock for six months in return for early and guaranteed allocation.
"If the market remains volatile and (mainland) money can't get out, this means that it's going to be difficult to get any sizeable IPO done," said Philippe Espinasse, former head of Asia equity capital markets at Nomura Holdings and author of IPO: A Global Guide. "A significant proportion of the cornerstone investors for Hong Kong IPOs nowadays are (mainland) investors," he said.
The three mainland banks that went public in Hong Kong in the last 12 months relied on mainland cornerstone investors and their affiliates for an average 44 percent of their IPO size. Zheshang Bank hasn't set a new timetable for its offering, the people said.
A Hong Kong-based external spokeswoman for Zheshang Bank said she couldn't immediately comment.
The mainland is limiting advance purchases of foreign currency for overseas investments, and regulators have asked some banks to strengthen their management of foreign-exchange operations, people familiar with the matter said last month.
(HK Edition 03/01/2016 page9)