China week in review
China has been one of, if not the, most active IPO markets in 2009
China boasts most of the top IPOs in Asia in 2009
With only two weeks to go before year 2009 comes to a close, it is fairly safe to say that China has been one of, if not the most active IPO market this year. Companies have collectively raised more than $30 billion through initial public offerings on the exchanges in Shanghai, Shenzhen, and Hong Kong. And the number looks all the more impressive considering that China's securities regulators did not give the green light to any new share offering until June, so most of the IPOs were actually packed into the second half of the year.
Large state-owned enterprises remain darlings of the capital market. China State Construction, the largest builder of infrastructure projects and homes in China, was the first mega-IPO to hit the Shanghai Stock Exchange, raising a staggering $7.3 billion in July. It was followed by a string of large IPOs from other state-owned corporations in the industries of basic materials, power generation, ship building, and financial services.
In the near future, we will continue to see large state-owned companies dominating the IPO pipeline on markets closer to home because securities regulators now believe Hong Kong and Shanghai provide sufficient liquidity to support the large IPOs. As a result, we will likely see more medium and small Chinese firms flock to overseas stock exchanges for capital because of the lack of investor interests at home.
Market recap
The recent flood of new listings on the A-share market and the
still-busy listing schedule until the end of 2009 have many investors
worrying that the market may have been too hot and due for a correction
in the near future. The Shanghai Composite Index dropped 4.1% to 3,114
points, while the Shenzhen Composite Index shrank 6.9% to 12,915.
Macro and industry updates
China raises down-payments for land acquisition to 50%
Last Friday, five government ministries jointly issued an announcement to raise down payments for land purchases to at least 50% of the total bidding prices, up from the 20%-30% requirement in the past. This is to raise the capital hurdle for property developers, which have been bent on growing their land banks in major cities this year and bid up land prices sharply in open auctions. Meanwhile, according to media reports, the central government summoned more than 600 vice mayors to Beijing for the annual housing conference last week, to discuss ways to increase the housing supply and slow the surge in housing prices that have drawn bitter complaints from ordinary consumers. The central bank released a survey last week showing that two thirds of Chinese consumers think property prices are too high.
Chinese banks reported capital adequacy ratio of 11.4% by the third quarter
This is according to a report released last week from the China Banking Regulatory Commission (CBRC). The report also said that the weighted average core capital adequacy ratio of Chinese commercial banks was 9% at the end of the quarter. Regulators expressed concerns about credit quality control amid rapid loan growth this year and high loan concentration in sectors such as infrastructure construction, property market, and manufacturing. To tighten scrutiny of the banks' balance sheet, the regulators now require Chinese banks to disclose core capital, capital adequacy ratio, and core capital adequacy ratio on a quarterly basis.
Top three online game providers held 57% market share in the third quarter
According to independent researcher Analysys International, online game providers reported sales of CNY 6.9 billion in the third quarter of 2009, up 11.4% from the second quarter. Tencent, best known for its popular QQ instant messengers, was the top player in the quarter with a 23.1% market share. It was followed by Shanda (20.8%) and Netease (12.9%).
Contributions from Lun Lu, Iris Tan and Zhao Hu.
