- Potential cornerstone buyers report difficulty sending funds
- IPO pre-marketing was originally scheduled to start Monday
China Zheshang Bank Co. postponed gauging demand for a $1 billion Hong Kong initial public offering, after stock buyers reported difficulty transferring money out of mainland China, people familiar with the matter said.
Potential cornerstone investors from China told deal arrangers they couldn’t get timely regulatory approval to send money across the border, according to the people, who asked not to be identified because the information is private. The lender, based in the eastern Chinese city of Hangzhou, had originally planned to start so-called pre-marketing of the deal on Monday, the people said.
Any curbs on money outflows could hurt the Hong Kong market, where the amount raised from first-time share sales rose 13 percent last year to $33.9 billion, data compiled by Bloomberg show. Many companies listing in Hong Kong set aside more than half their IPO shares for predominantly Chinese cornerstone investors, who typically agree to hold on to their stock for six months in return for early and guaranteed allocation.
“If the market remains volatile and Chinese money can’t get out, this means that it’s going to be difficult to get any sizeable IPO done,” Philippe Espinasse, the former head of Asia equity capital markets at Nomura Holdings Inc. and author of “IPO: A Global Guide,” said by phone. “A significant proportion of the cornerstone investors for Hong Kong IPOs nowadays are Chinese investors.”
The three Chinese banks that went public in Hong Kong in the last 12 months relied on mainland China cornerstone investors and their affiliates for an average 44 percent of their IPO size, according to data compiled by Bloomberg. Zheshang Bank hasn’t set a new timetable for its offering, the people said.
China’s State Administration of Foreign Exchange didn’t adjust policies on overseas securities investments, it said in a statement on its official microblog in response to an unspecified media report on Zheshang Bank’s IPO. Domestic investors can participate in foreign capital markets through means including the Qualified Domestic Institutional Investor program, the regulator said.
A Hong Kong-based external spokeswoman for Zheshang Bank declined to comment.
China is limiting advance purchases of foreign currency for overseas investments, and regulators have asked some banks to strengthen their management of foreign-exchange operations, people familiar with the matter said last month.