CHINESE companies are rushing to take advantage of a recent equities rebound to raise funds, using what may be a narrow window before the market falters again.
Mining company MMG proposed a rights offering in Hong Kong to raise HK$9.08 billion (S$1.6 billion), while Yankuang Energy Group is eyeing US$634 million in a shares placement. Separately, Poly Developments and Holdings Group is considering raising as much as 12 billion yuan (S$2.2 billion) via notes that can be turned into equity.
The firms join other Chinese companies seeking to raise cheap funding through equity or equity-linked notes following signs of life in the country’s stock market. The additional issuances are a bright spot for bankers, who have seen mergers and acquisitions and initial public offerings dry up.
Yankuang’s placement is the largest by a Hong Kong-listed firm since April 2023, when sportswear developer Anta Sports Products raised US$1.5 billion through a similar offering, according to data compiled by Bloomberg. Boosted by Yankuang, share sales by Hong Kong-listed companies jumped to US$1.7 billion this quarter, already the highest in a year.
Chinese companies have also been tapping convertible bonds at a record pace as they give firms the flexibility to raise funds cheaply without immediate stock dilution, at interest rates that are usually lower than on regular debt. Alibaba Group Holding and JD.com raised US$7 billion together through the tool last month.
“Chinese companies are trying to ride on the positive momentum to raise money they need as we see enthusiasm over the Chinese market now,” said Kenny Ng, a strategist at China Everbright Securities International. On convertibles, he said the onshore market has an extra benefit as the cost there is even cheaper with lower interest rates.
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Poly’s offering, if it happens, will be rare in that only three Chinese real estate firms have raised over US$1 billion through a convertible over the past twenty years, Bloomberg data show.
Fund-raising efforts may gather pace as signs of cooling momentum in the Chinese stocks rebound spur a sense of urgency to firms. Companies need to capitalise on a rally that may well reverse given investors’ concerns about the country’s policy uncertainties and geopolitical risks.
The CSI 300 Index for mainland shares has slipped after rallying about 16 per cent through mid-May from this year’s low. The Hang Seng China Enterprises Index has also failed to extend gains following a near 40 per cent trough-to-peak advance.
Some hedge funds have taken profit following a rally in property developer stocks while others have built short positions, according to JPMorgan Chase.
A Bloomberg Intelligence stock index of developers surged more than 70 per cent over the month through May 17, when Beijing unveiled a housing rescue package that included cutting mortgage rates and down-payments. The gauge fell in the following two weeks as doubts emerged on the potency of the measures.
“If the equity rally of the China property sector continues, which is a big if, we might see more developers tapping the CB market,” said Zerlina Zeng, senior credit analyst at Creditsights Singapore. BLOOMBERG
