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Wednesday, 8 August, 2001, 09:11 GMT 10:11 UK
Sinopec shares stall on debut
Sinopec web page
Asia's largest oil processor floats but fails to make a splash
Sinopec, China's second largest state oil company, has carried out the country's biggest ever company flotation, raising $1.43bn on the Shanghai Stock Exchange.

But the debut was hit by steep falls in China's stock markets during the past fortnight, triggered by sales of state shareholdings to fund a new pensions and social security system.

Sinopec listed at 4.22 yuan, shot up 11% in early trade to 4.70 yuan, then retreated, raising analyst fears it could trade below the offer price.

The rise of 11% in early trade compared with average rises of 156% recorded last year by new issues on their first day of trading.

Domestic giants choose China

Sinopec's decision to list on a domestic stock market is part of a trend away from international listings among China's major companies.

Given depressed overseas stock markets, they calculate they can raise more money by plugging into brand recognition at home.

Baoshan Iron and Steel set the trend, when it raised $950m in China's previous biggest domestic flotation last autumn. PetroChina plans to top Sinopec's float with a $1.5bn offering later this year.

Sinopec, which raised about $1bn in 2000 through its international listing and is China's second biggest state oil company, said the retail portion of its offering was 160 times oversubscribed when the bookmaking process closed.

Stock market sags

Since Sinopec unveiled plans in April for a listing of Shanghai A shares, the A shares index has fallen, losing nearly 15% since its 13 June peak. A shares are restricted to domestic investors.

B shares, which are open to foreign investors, have fared equally badly, falling 10% on 6 August alone.

Share prices have been hit by forced sales of state shareholdings to fund pension reform, coupled with fears of a crackdown on the use of bank loans for stock market speculation.

Sinopec appealed for exemption from a regulation obliging companies to use 10% of funds raised in IPOs to set up an employee pension scheme.

The company eventually increased the size of the IPO from $1.2bn to $1.43 bn.

The Shanghai A share index was down 0.23% in late trade on Wednesday.

Trading on Wednesday was restricted to the 55% tranche of the IPO offered to retail investors.

The other 45% of Sinopec's domestic IPO is reserved for institutional investors and will be locked up to eight months after Wednesday's retail listing.

Sinopec, which is also known as China Petroleum & Chemical Corporation, said it will use $1.1bn of the proceeds to buy Sinopec National Star Petroleum Company from its parent, to improve its upstream assets base and overall operation efficiency.

See also:

07 Aug 01 | Business
China stocks reel as rulers disagree
26 Jul 01 | Business
China's 'firewater' to float
01 Mar 01 | Business
China's stocks near record
19 Feb 01 | Business
China reforms stock market
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