Analysis: China Expected to Dominate Equity New Issues in 2001

China is likely to lead equity new issue activity for the rest of 2001, as investors are exhibiting strong interest in increasing their exposure to China and the Chinese equity issues, a senior economist on securities market in Hong Kong predicted Friday.

Potential further sell-downs by the Chinese government in oil and gas and telecommunications sectors and renewed appetite for the Chinese issues could propel China to top the fund raising league table for the year, said George Pavey, director of equity capital markets at Credit Suisse First Boston (CSFB), a leading global investment bank.

According to a recent CSFB report on Asia's equity issue markets, total new issuance volume for the region in 2001 will be between 20 billion U.S. dollars and 25 billion U.S. dollars when the region's backlog exceeds 41.6 billion U.S. dollars. China accounts for 50 percent of the backlog, according to the firm's estimates.

Regionally, equity offerings of one billion U.S. dollars plus in size and privatization are likely to dominate the scene, the report said.

"If sentiment improves, privatization activity is likely dominate new issue activity in the second half of 2001 driven by issues emanating from China's mainland, Taiwan and South Korea," Pavey said.

Telecommunications and technology issues could account for a large portion of total volumes, and the financial services sector could also witness a surge with potential IPOs coming out of China and south Korea, as well as fund raising by Singaporean banks to finance their acquisitions, he said.

Analysts on equity markets at the Hong Kong-based Salomon Smith Barney estimated that investors who participated in straight equity issues in Asia in the second quarter made a 9.7 percent return on average, outperforming most indices in the world.

Many of the issues from Asia have attracted strong demand from investors around the world, with oversubscription levels averaging above 2.5 times, and equity mutual fund flows exceeded 40 billion U.S. dollars in the second quarter, showing investors' willingness to put capital to work, the analysts believed.






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