CICC jumps on debut, boosted by China's return to IPOs

A China International Capital Corp. (CICC) branch stands in Beijing, China.
Nelson Ching | Bloomberg via Getty Images

China International Capital Corp. (CICC) got off to a strong start on Monday, as its market debut in Hong Kong coincided with Beijing's announcement to lift a four-month ban on initial public offerings (IPOs).

Shares of the Chinese investment bank closed 7.2 percent higher at 11.02 , after climbing as much as 11.2 percent to HK$11.44 in the morning session, outperforming the broader index which dropped 0.7 percent. CICC had priced its 1.42 billion new shares at the top of the HK$9.12-HK$10.28 marketing range to raise $811 million.

Analysts say the announcement by the China Securities Regulatory Commission (CSRC) Friday may have fanned appetite for the stock, as the resumption of IPOs in China could give CICC's revenue a boost.

"Investors think CICC may get some benefit in the mainland with the re-opening of the IPO market," Ronald Wan, CEO of investment banking at Partners Capital International, told CNBC.

A "restoration in investor confidence" following a drastic meltdown in China's equity markets in June and July also contributed to CICC's strong debut, Hong Kong-based Wan added.

China sentiment is positive on financial IPOs

On Thursday of last week, China's benchmark Shanghai Composite found its way back into a technical bull market, rising more than 20 percent from its low on August 26. This cheered the battered market, which went into a free-fall in mid-June despite an array of unprecedented measures by mainland regulators, including direct share purchases by state entities and a freeze on IPOs.

CICC, established in 1995 as a joint venture between China Construction Bank, Singapore sovereign wealth fund GIC Ltd. and Morgan Stanley, plans to use the funds to expand its equity sales and trading and wealth management businesses as well as its international subsidiaries.

The long-awaited IPO was originally planned for the third quarter, but was delayed due to the turmoil in the mainland's financial markets. The Chinese investment bank, which counts global private equity firms KKR & Co. and TPG Capital Management among its shareholders, also slashed its IPO size from $1 billion.

"Market sentiment wasn't that great earlier on. Investors were cautious, especially given that there were two big IPOs earlier on, so the lowering of IPO prices can improve investor interest. And I think the strategy has been successful," Partners Capital International's Wan said.

CICC's market debut marked the latest in a series of large floats in Hong Kong, including reinsurer China Re and "bad bank" China Huarong Asset Management. Both listed in October, raising a combined $4.3 billion.

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For Eastspring Investments, these listings bode well for China's financial sector.

"CICC's IPO, coupled with the recent listings of China Re and China Huarong Asset Management, has brought back some positive sentiment to the financial sector, especially since focus in the past few months has been more on Chinese I.T. stocks given the upcoming MSCI inclusions of the ADRs," Asia equity portfolio specialist Ken Wong said. The American Depositary Receipts (ADRs) of some of China's tech giants, such as Alibaba, are expected to be included in the benchmark index in the next review.

Hong Kong-listed mainland brokers outperformed on Monday, with Citic Securities, China Galaxy Securities and Haitong Securities up between 0.6 and 1.6 percent.

Reuters contributed to this report.