Ping An Insurance (Group) Co, the country's second largest insurer, won't change its refinancing plan after it triggered a sharp market fall and spurred a new round of share sales by other listed companies, sources said.
"Ping An teams, led by the company's top management, have just finished a roadshow in Beijing, Shanghai and Shenzhen. They outlined strategic planning and the use of capital raised from the share sale to fund management companies," Wang Xiaogang, an analyst with Shanghai-based Orient Securities, said yesterday.
On Jan 21, Ping An announced pricing details for its plan to sell 1.2 billion Ashares and 41.2 billion yuan of convertible bonds - the largest equity refinancing bid in China's capital market.
The insurer said it would use funds raised to invest in mergers and acquisitions compatible with its core businesses.
"Ping An didn't change the scale of the refinancing plan, though their mega share sale triggered dispute and weighed heavily on the weakened capital market. But they may choose to issue convertible bonds first and new shares later," Wang said.
Ping An's proposed share and bond sale must still be approved by regulators and a two-thirds majority of shareholders at a meeting scheduled for March 5.
A further 23 listed companies have launched refinancing plans since Jan 21 to raise a total of 204.3 billion yuan, according to financial information provider Wind Info.
Of the companies, 16 plan to issue additional shares to raise 155.73 billion yuan. Large-scale share issues apart from Ping An's include Merchants Real Estate's plan to raise 8 billion yuan and ST Taige Bio-Tech Corp's plan for 6.3 billion yuan.
"Given the current conservative market sentiment, listed companies should think twice when working on their refinancing plans," said Dong Chen, a senior analyst with CITIC China Securities. "Convertible bonds and small-scale additional shares are better choices (for the issues)."
The benchmark Shanghai Composite Index sank 97.27 points, or 2.09 percent, on Wednesday, on news of Pudong Development Bank's 40 billion yuan share issue plan. The index lost a further 39.85 points, or 0.87 percent, yesterday to close at 4527.
Although there were large-scale share issues last year - such as CITIC Securities' 26.2 billion yuan plan in August - they were good news for investors at a time when the market was bullish and full of optimism, Dong said. But when the market is flat and cautious, investors tend to react negatively to news that may divert large chunks of capital from the market, he said.
(China Daily February 22, 2008)