China Railway Signal becomes Hong Kong’s fourth largest IPO

China Railway Signal & Communication Corp, a state-owned entity, raised US$1.42 billion after pricing its Hong Kong initial public offering at the lower end of the IPO range, in the backdrop of China’s stock market challenges and volatility.

 

The IPO is the fourth largest one this year in Hong Kong, as it sold 1.75 billion new shares at HK$6.3 (81 U.S. cents) each.

 

Although China Railway Signal acquired cornerstone investors for more than half of its new offerings, the deal was still at the lower end of its HK$6.30 to HK$8.00. Cornerstone investors help improve investors’ confidence in the company, as they commit to hold their shares for a certain period after they list on the market.

 

There were 16 cornerstone investors that purchased China Railways Signal’s share, which include a few state-owned firms. China Railway Group took US$100 million worth of shares and life insurer China Life Insurance Co agreed to buy US$50 million.

 

Other major listings this year in Hong Kong are US$5 billion by China Securities firm HTSC, also known as Huatai Securities, and GF Securities which listed for US$4.1 billion.

 

Recently due to sinking Chinese stock markets, the appetite for investors has been weaker than normal. Chinese shares have suffered their worst month in almost six years, even after the government led effort to temporarily prop the markets. The Shanghai Composite Index dropped by 14% in July, its worst month since August 2009, and Index in Shenzhen have also seen better days.

 

 

    

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