China Zhongwang Holdings, the country's biggest extruded aluminum products maker, yesterday kicked off the world's biggest initial public offering (IPO) so far this year by starting to take orders from institutional investors for its US$1.6-billion share sale.

Zhongwang mega IPO to raise US$1.6bln [CFP]

Zhongwang plans to raise as much as HK$12.32 billion yuan by issuing 1.4 billion new shares in Hong Kong, in what could be the first US$1-billion IPO in the world this year, according to Thomson Reuters data.

The aluminum products maker will use the proceeds from the new shares, which will be priced at HKUS$6.80 to HKUS$8.80 each, to expand production, repay loans and improve research and development capacity, according to its prospectus.

The company is planning to expand its production by 50 percent from the current 530,000 tons a year to 800,000 tons in 2011, its Managing Director and Vice-Chairman Lu Changqing said.

The IPO, managed by Citic Securities, JP Morgan Chase and UBS, comes at a time when stock markets worldwide are climbing from their 12-year lows seen in March.

The global financial crisis forced more than 300 companies worldwide to put stock offerings on hold last year and led to the slowest quarter for Hong Kong IPOs in a decade in the first quarter of this year, according to Bloomberg data.

Hong Kong's Hang Seng Index has gained a third in value since its year-low in March, while the Shanghai Composite Index has jumped 40 percent since the beginning of this year.

There have only been 60 IPOs this year worldwide, Thomson Reuters data showed, with an average size of just US$32.3 million. Zhongwang's IPO, analysts said, is a sign that the once-dormant market for Chinese mainland companies' IPOs has revived again.

"As the Hong Kong market stabilizes and the mainlandeconomy's expected recovery in the second half, you could expect more IPOs by mainland companies in the coming months," said Dong Xian'an, chief macro economist at Southwest Securities.

The Hong Kong stock market has seen seven listings this year, raising a total of US$333 million, or 17 percent of the global total.

Earlier this month, Silver Base, a mainland whisky and cigarettes distributor made its trading debut in Hong Kong.

Changyou.com, an online game developer controlled by Internet portal Sohu.com was recently listed on the NASDAQ stock market, the first IPO by a Chinese company in the US since last August.

"You may see more such deals in the next few months by mainland companies as listings in Hong Kong has fewer cumbersome procedures compared with domestic listings," Dong said.

Zhongwang, based in Northeast China, saw its profits double to 1.9 billion yuan last year as sales increased, the company said.

Zhongwang, whose products are used in window frames and components for train carriages, had assets of 11.6 billion yuan by the end of last year, employing 3,128 people.

The biggest IPO so far this year was made by Mead Johnson, a US-based pediatric nutrition company, which raised US$828 million in February on the New York Stock Exchange.

(China Daily April 21, 2009)