China’s RM1 trillion IPO


STOCK market bull runs have tended to occur after a big build-up of cash savings by the public. In China, household savings exceeded US$2 trillion in the banks, creating a perfect setting for the market rally.

The initial public offering (IPO) of China Shenhua Energy last week drew a record 2.6 trillion yuan (RM1.2 trillion) in applications.

Shenhua, the biggest coal producer in China, raised IPO proceeds of RM30bil, which meant the offering was 40 times oversubscribed.

Two figures stand out. First, the RM1.2 trillion cash that was sent to apply for the shares is incredibly large. Second, Shenhua raised RM30bil cash, almost as much as Telekom Malaysia Bhd's total market value, by just selling 9% of its enlarged share capital.