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Taiwan's Chunghwa Plans China IPO
Jan 15, 2004
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Chunghwa Picture Tubes, Taiwan's third-largest flat panel maker, hopes to raise Rmb 3.6 billion (approx. U.S. $435 million) to expand in China by taking its Fuzhou plant public on the Shanghai A-share market this year, the company said.

A successful listing would represent a significant advance for foreign-funded companies, which have been pushing to gain access to China's local-currency stock market.

Chunghwa's initial public offering (IPO), if approved, would be only the second by a fully foreign-funded company on the local Chinese bourse. It would also be much larger than the first, Zhejiang King Refrigeration, a Taiwanese-funded manufacturer of air-conditioners, which raised Rmb 280 million in late 2003.

"We have applied to sell 900m shares of our Fuzhou plant, which will be priced at Rmb4 each," said Sophia Tsao, an investor relations executive at CPT.

However, it is not clear how quickly the application might be approved by Chinese regulators, which already have a long queue of companies qualified to list.

The China Securities Regulatory Commission (CSRC) has rationed listings during last year so as not to flood the struggling market with too many new shares.

However, the local A-share market has staged a small recovery since November and also recorded large increase in turnover, which may encourage the CSRC to allow an increase in IPOs.

China may also want to allow a number of Taiwanese companies to list on the mainland as a political gesture to encourage continued cross-strait trade and economic co-operation.

A number of analysts expressed strong doubts over the feasibility of the plan and the motives behind any approval from Beijing.

"In Hong Kong, Taiwan, or the U.S., you will be granted approval if you fulfil the conditions spelled out in listing regulations, but in China, there are many gray areas, and approval is often a political decision," said Thomas Liu, CEO of Friendly Business Group, a Taiwanese-owned consultancy.

Against this background, Chinese authorities could attempt to gain Taiwanese businesses' goodwill in the run-up to Taiwan's March presidential election by approving IPO applications quickly.

The green light for the Zhejiang King Refrigeration IPO, which came earlier than expected, had been a political gesture, sources close to the company said.

Mr. Liu said the CPT application also went against the CSRC's policy of "picking small-to-medium-sized firms from diversified sectors for listing to let the market grow in a balanced way."

Officials at Taiwanese companies in China said Global Union, a Taiwan-controlled bathroom equipment maker in Shenzhen, was the most likely next candidate to get approval for its A-share listing application.

Taiwan's government pledged last year it would liberalize rules under which Taiwanese companies could raise money on the domestic market for investments in China, but has delayed those plans.

The Fuzhou plant, which is to be restructured into a subsidiary, would change its focus from the current cathode-ray tube monitor production to plasma displays, Ms. Tsao said. (Financial Times/FT.com)

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