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Yongle Plans to Start HK Offering Soon

Shanghai Yongle Electronics said it will begin a market listing soon in Hong Kong after the plan was delayed because of unfavourable market conditions, company officials said.

"We have delayed our listing plan because of tumbles in the market," said Chen Xiao, president of the company. He had said earlier that the company planned to go public on the Hong Kong market in July.

He refused to comment on reports that the listing will happen some time between September and October, and said no timetable could be given at the moment.

Analysts said Yongle will not delay its listing for long as it has completed preparations and is just waiting for the right time.

"The market is not good for electronics retailers since Gome's share prices took a dive recently," said Hu Yanfeng, an analyst from the Haitong Securities.

Gome's (one of China's top home appliance retailers) stock listed in Hong Kong fell more than 30 percent in 10 sessions in July, as markets worried its margins would be weaker than expected due to increased competition and high expansion costs.

Reports said Yongle is expected to raise US$200-300 million with the listing and Morgan Stanley will be one of the underwriters.

The investment bank is the third largest shareholder in Yongle, behind its President Chen and another company official after it acquired a 20 percent stake costing US$50 million last year.

Previously, Chen claimed in an interview with the Chinese newspaper Economic Observer that Yongle will list both in Hong Kong and the US next year, raising approximately US$1 billion.

Raising money quickly on domestic or overseas capital markets is a way for China's electronics retailers to sharpen their competitive edge.

They can use their IPO income to quickly build new chain stores in strategic markets, said Hu.

Previously focusing on the East China market, Yongle has accelerated the opening of stores in other areas such as Beijing and Nanjing.

Company officials said in an earlier interview with China Daily that the company will increase the number of outlets to 350 by the end of this year, from 108 at the end of 2004.

This is expected to push the company's sales to about 35 billion yuan (US$4.32 billion) by the end of the year, from about 15.8 billion yuan (US$1.95 billion) last year, the company said.

Suning, one of the leading electronic product chains in China, has finished its IPO on the Shenzhen Stock Exchange. The company issued 25 million shares, bringing in as much as 400 million yuan (US$49.3 million).

Gome gained a Hong Kong listing in June via a US$1 billion stock and bond swap with its sister firm, China Eagle Group.

Both companies planned to increase their stores to 1,000 in the next five years.

(China Daily August 4, 2005)

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