BOE Completes China’s Biggest Share Sale in 17 Months
By Bloomberg News
June 9 (Bloomberg) -- BOE Technology Group Co. sold 12 billion yuan ($1.8 billion) of shares to fund liquid-crystal- display investments, completing China’s biggest equity fund- raising for 17 months after stock markets rebounded.
China’s largest LCD panel maker rose by the 10 percent daily limit in Shenzhen trading after selling 5 billion shares privately to selected investors at 2.40 yuan each. The company’s sale was the biggest since China Coal Energy Co. raised 25.7 billion yuan in its January 2008 initial public offering.
BOE Technology’s placement underscores demand for share sales after China’s 4 trillion yuan stimulus plan and record bank lending spurred a 50 percent increase in the benchmark Shanghai Composite Index this year. Shanghai Pudong Development Bank Co. and China Yangtze Power Co. are among Chinese companies awaiting regulatory approval to sell stock.
“The market is now awash with liquidity and market sentiment is improving,” said Zhang Ling, a fund manager at ICBC Credit Suisse Asset Management Co. in Beijing, which oversees the equivalent of about $7.21 billion. “New share sales aren’t perceived as bad news anymore.”
BOE Technology sold the shares at a 48 percent discount to the stock’s closing price yesterday. Investors included Haitong Securities Co., Southwest Securities Co. and Xiamen Hengxing Industrial Co. Chairman Ke Xiping, the Beijing-based company said in a filing today to Shenzhen’s stock exchange.
The company said in November it planned to sell as many as 5.5 billion shares for at least 2.20 yuan each. Its stock jumped 0.46 yuan today to close at 5.05 yuan in Shenzhen trading, the highest close since April 20. China’s benchmark Shanghai Composite Index rose 0.7 percent.
BOE, which mainly makes so-called fifth generation LCD panels for use in personal-computer monitors and televisions measuring 17-inches diagonally, said it plans to use the proceeds from the placement to construct a plant for manufacturing sixth-generation panels that are more expensive and used for larger screens. The company will invest 9 billion yuan from the share sale in the factory that will cost 17.5 billion yuan to build.
The company had a net loss of 807.5 million yuan in 2008 and has posted an annual profit only once in the past four years.
“To have a successful placement means you must have buyers, which shows a level of confidence in the company and the market and economy,” said Clive Zhang, Hong Kong-based executive director of Vision Finance Asset Management Ltd., which oversees about $30 million. “There are worries that there’s too much money in the market and not enough going into the real economy. These placements will help channel some of that liquidity into the real economy.”
Private placements have been the only share sales in China since the government halted IPOs in September. Initial offerings were stopped after the Shanghai Composite Index fell almost 60 percent in the first nine months of 2008.
Ten Chinese companies raised about 5.4 billion yuan from private share sales last month, according to Bloomberg data. Pudong Development Bank said in April it planned to raise as much as 15 billion yuan in a private placement to ensure it has enough capital to meet regulatory requirements. Yangtze Power said last month it plans to sell 20 billion yuan of stock to its parent as part of its acquisition of power-generation assets.
The China Securities Regulatory Commission said in March that it would allow IPOs to resume after the regulator installed a new system for pricing initial offerings. Draft guidelines for the pricing of IPOs were issued last month. The regulator has already approved 32 companies to sell shares publicly, without saying when they may do so.
“The real test of market confidence would come when China resumes initial public offers,” said Philippe Zhang, Shanghai- based chief investment officer at AXA SPDB Investment Managers, which has about $220 million under management.