Strike while the iron is hot.
That seems to be the guiding principle of Chinese companies who took advantage of multi-year highs in both the mainland and Hong Kong stock markets to raise cash through initial public offerings (IPOs).
According to Reuters, Chinese firms have so far this year raised a total of $63 billion from IPOs, nearly double compared to the $34.5 billion that they received in the same period of last year. Financial firms led the fund-raising, with noticeable gains from healthcare, media and entertainment industries.
China’s key indexes soared to seven-year highs recently as investors were encouraged by the positive market outlook from the Chinese media, as well as optimism that the government will take more steps to open up the country’s capital market as part of a campaign to internationalize the renminbi, and for the “A” shares to be part of the MSCI emerging markets index.
Hong Kong’s Hang Seng Index also climbed the seven-year peaks in April, as investors cheered the government’s decision to allow mutual funds to buy shares in the former British colony through the Shanghai-Hong Kong Stock Connect.
Aside from the roaring stock market, companies are also encouraged to launch IPOs given the feverish response from investors. The recent $2 billion IPO of China Nuclear Power Co attracted $273 billion in subscriptions from investors, according to Bloomberg.
This week, 25 Chinese firms are set to sell shares for the first time in Shanghai and Shenzhen stock exchanges that would raise around 41 billion ($6.6 billion) yuan. The share sales may attract 6 trillion yuan in bids, according to mainland media reports.
Photo credit: Jason Wesley Upton via Flickr