In a volatile year, and with confidence in China’s economic growth waning, one bank’s expertise helped numerous companies raise valuable equity capital. For its work in generating demand from non-traditional IPO sources, CICC is IFR Asia’s China Equity House of the Year.
With the pace and size of domestic equity offerings tightly controlled during the review period, CICC’s ability to deliver overseas listings took on a new significance for Chinese issuers.
To add to the challenge, the Hong Kong IPO market, the main avenue for Chinese companies looking to tap overseas investors, cooled on global economic concerns, making it even harder to raise equity. During the review period, IPO proceeds raised in Hong Kong fell more than 60% year-on-year to US$8.5bn.
CICC managed, against this backdrop, to help Chinese companies raise a total of US$4.23bn from 15 successful fundraisings – both onshore and offshore – and finished the review period with more Hong Kong listings to its credit than any of the banks that ranked above it in the league tables.
Getting an IPO done at home or overseas was far from easy, since institutional investors – the traditional participants in Chinese IPOs – had almost no interest in new listings at all. Finding and bringing in alternative demand became a key element in the success of any deal. Here, CICC performed better than any other bank.
Unlike many global banks, which see IPOs as only a small part of their business and mostly rely on equity sales teams to distribute shares, CICC, traditionally an IPO powerhouse, had a strong incentive to mobilise its investment-banking team and get deals done.
The investment bank used its long-standing relationship with PRC corporations to create a new source of demand for Chinese IPOs. The bank also leveraged its relationships with qualified domestic institutional investor (QDII) funds and top Chinese private wealth-management accounts to get IPOs done.
“Compared with many other banks, CICC has a strong focus on the IPO business. The huge resources the bank has put into its investment banking department and the unmatched relationship with leading Chinese firms have put it in a better position to withstand the storm,” said Li Jian, co-head of equity capital markets at CICC.
Three CICC trades – Inner Mongolia Yitai Coal’s HK$7.01bn (US$901m) IPO, China Nonferrous Mining Corp’s HK$1.9bn IPO and China Aluminum International Engineering Corp’s HK$1.4bn IPO – all got done thanks to strong support from Chinese corporate investors.
CICC, for instance, brought in Datang International Power Generation as the largest cornerstone investor for the Yitai transaction.
Yitai’s listing, the fifth-largest Hong Kong IPO during the review period, showed CICC’s ability to communicate with government and regulatory agencies.
Yitai is listed on China’s B-share market and had been seeking a Hong Kong listing since 2008. As there was no such precedent, the China Securities Regulatory Commission handled the case cautiously, and hesitated before approving the float.
After prolonged discussions, CICC finally convinced the regulators that the deal would create a template that would solve the longstanding issue related to the illiquid B-share markets. The deal finally landed on the Hong Kong bourse in July.
Other sizable Hong Kong IPOs that CICC completed included the HK$10.3bn floatation of New China Life Insurance and HK$3.97bn one of Shanghai Fosun Pharmaceutical.
CICC also remained a leading bank in China’s domestic markets. However, CSRC’s unwritten rule of not allowing companies to raise more than Rmb5bn (US$802m) through their A-share IPOs made jumbo deals – traditionally a strong area for CICC – impossible.
CICC responded with aplomb. It expanded its client coverage to small- and medium-sized Chinese companies and promptly brought several successful deals.
For instance, it sole-arranged the Rmb4.48bn A-share IPO of Jiangsu Phoenix Publishing & Media Group, the largest such float in the media sector.
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