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the mainland’s largest investment bank, was
involved in China Mobile’s initial listing on the
Hong Kong stock exchange back in 1997. TOPREDCHIPCOMPANIESBYMARKETCAPITALISATION
If China Mobile does get the green light, it is
expected to float about 5% of its existing shares
Red chip name Company description Market cap
in Shanghai. That could raise around Rmb90
(HK$million)
billion (US$13.2 billion) based upon its current
ChinaMobile Telecommunicationsoperator 1,456,372
H-share valuations, according to analysts.
CNOOC Crudeoilandnaturalgasproducer 533,350
China Mobile could use the additional capi-
ChinaUnicom(HongKong) Telecommunicationsoperator 245,517
tal. The company needs to invest in expanding BOCHongKong(Holdings) Bankingandfinancialservices 187,984
its third-generation (3G) network to compete ChinaOverseasLand&Investment Realestateandpropertydeveloper 136,088
with domestic rival China Unicom. Having lost ChinaResourcesLand Realestateandpropertydeveloper 90,430
market share to its rival over 2009, China CITICPacific Infrastructureandmanufacturing 74,798
Mobile is now pinning its hopes on new 3G serv- ChinaResourcesPowerHoldings Energyandpowerplantoperator 73,922
ices such as mobile television to drive growth BeijingEnterprisesHoldings Naturalgasandwaterdistributor 59,877
amid intensifying competition and falling rev-
ChinaMerchantsHoldings(International) Portoperator,paintmanufacturer 58,629
enues from traditional mobile services.
ChinaResourcesEnterprise Foodandbeveragedistributor 58,088
“We are getting closer and closer to the A-
ChinaTaipingInsuranceHoldings Insuranceandassetmanagement 51,061
share listing,” Wang Jianzhou, China Mobile
LenovoGroup Computermanufacturer 42,494
chairman, said at a forum in Hong Kong during
ShanghaiIndustrialHoldings Realestate,infrastructuredeveloper 41,894
November. “China Mobile has been working to
CNPC(HongKong) Oilandgasproducer 39,077
make progress of it and all the preparation work
ChinaAgri-IndustriesHoldings Agriculturalproducerandsupplier 37,808
has started.”
Sino-OceanLandHoldings Realestateandpropertydeveloper 36,342
Lenovo is also a prime candidate for a
DenwayMotors Automobilemanufacturer 35,789
Shanghai IPO in 2010. The world’s fourth-
Poly(HongKong)Investments Propertydeveloper,hoteloperator 32,943
biggest maker of personal computers has pub-
COSCOPacific Containerterminal,shippingoperator 24,435
licly declared its interest in listing in Shanghai
when the rules permit, given that it is already
SOURCE: ASIAMONEY RESEARCH; BLOOMBERG
one of China’s best-known brands and holds
about one third of the market.
“I obviously would wish to list yesterday,” says Wong Wai Ming, The face value (also known as the “par” value) of A and H shares
Lenovo’s chief financial officer. “Knowing Lenovo’s market share in differs because A-shares are denominated in renminbi while H-shares
China, it makes a lot of sense and we would follow that issue very closely. are denominated in Hong Kong dollars. The valuations of a red-chip
We need to look at what the rules are, and what are the possible impacts company’s A and H shares could, therefore, have large discrepancies,
on our operations.” creating the need for a solution to homogenise the face value of shares
The company is presently headquartered in North Carolina, where it in both markets.
relocated in 2006 after acquiring IBM’s laptop PC business. Any fresh cap- Financial disclosure is another hurdle. Chinese accounting laws
ital raised would help support Lenovo’s strategy of expanding in China by state that companies should count their fiscal year from January 1 to
focusing on contracts from large corporate clients as well as penetrating December 31, but red chips and foreign companies operate under
China’s rural markets, which are still relatively underdeveloped. international norms and are free to choose their fiscal year.
However, a Lenovo spokesperson adds that while the company was inter- These challenges could well stymie what otherwise promises to be a
ested in an A-share listing, there is no timetable. vibrant source of equity deal flow.
Another name likely to be among the first to feature in a Shanghai “I’d expect very few red chips to list in Shanghai by next year,” says
listing is China National Offshore Oil Corp. (CNOOC), the country’s one equity capital markets (ECM) banker in Hong Kong. “The issue
largest offshore oil and gas producer. seems to be dragging on and there’s a reason why they haven’t hap-
In 2007 CNOOC tried, and failed, to issue shares directly on the pened yet. Authorities are cautious about a drain of liquidity and they
Shanghai stock exchange, tripped up by legal and technical difficul- don’t want to roil the markets.”
ties. This time round, the company is looking to enter the A-share mar- The CSRC’s new rules should address these issues and will also give
ket via the planned international board rather than by issuing CDRs. detailed guides to red chips and foreign companies for every stage of
“We are willing to list on the Shanghai stock exchange, but through the listing procedure including securities depository, clearing, issuing
which means [still depends on] the government’s final approval,” Fu and trading. A first draft for board listing rules was expected by the
Chengyu, chairman and CEO of CNOOC, told reporters in August. fourth quarter but had not yet been announced by the time Asiamoney
China Telecom, China Unicom and Shanghai Industrial are among went to press.
several other names also touted as viable contenders for a Shanghai Until these new guidelines are published, red chips and interna-
listing. tional firms remain in the dark about their listing prospects for 2010.
When it comes to operating in China, much hinges on the decision of
OBSTACLESTOOVERCOME government authorities and regulators, and their approval processes
Yet for all the optimism and desire to float shares in Shanghai, red are extremely hard to scrutinise.
chips and international firms still face several technical issues. But while uncertainties still exist, there is a feeling that given
Market observers have generally cited the control of capital enough time and coordination, the hurdles can be overcome.
accounts and the non-convertibility of the renminbi as the key obsta- The important thing is that Beijing looks interested in seeing off-
cles to outsiders looking to list on the mainland. shore companies enter its markets. After many years of waiting, China
There is also a technical challenge to overcome: the trading dynam- finally looks set to allow a select set of companies into its hallowed
ics of the A-share versus the H-share markets. financial halls.
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