News / Asia

AIA/AIG Looking for Big Month for Hong Kong IPO's

A prospective investor, left, takes a copy of the AIA (American International Group Inc) initial public offering (IPO) prospectus book at a bank in Hong Kong, 18 Oct 2010
A prospective investor, left, takes a copy of the AIA (American International Group Inc) initial public offering (IPO) prospectus book at a bank in Hong Kong, 18 Oct 2010
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Heda Bayron

The Asian unit of the troubled U.S. insurance giant, American International Group, is on track to raise at least $18 billion from its Hong Kong initial public offering.  AIA's listing next week will cap a month of intense capital raising in the city.

AIA's initial public offering (IPO) will be one of the biggest in Hong Kong this year. Much of that money will go to its parent AIG to help pay billions of dollars in debt to the U.S. government for its rescue during the financial crisis in 2008.

Mark Konyn is the chief executive officer of fund management firm RCM Asia Pacific in Hong Kong. At a Bloomberg-sponsored conference this week, he said the market will be able to absorb the AIA listing.

"I think the question is whether or not this particular issue runs the risk of exhausting investors through the process," said Konyn.  "Because of the option on the IPO, there's potential to go up. That's a question of how they manage that and how much they leave on the table."

This month, several companies, mostly from mainland China, came to Hong Kong to list on the stock exchange, because of an abundance of money in the financial system.

Mongolian Mining raised $651 million this month to become the first company from the northeastern Asian country to list in Hong Kong. IRC Ltd., a Russian mining company, listed this week, as Hong Kong continues to court foreign resource companies that are looking to sell to China.

Consumer-related Chinese companies have taken advantage of strong domestic demand to find fresh capital. The infant milk powder maker Yashili International Holdings is seeking to raise $400 million.

More companies are waiting to take their turn, but Konyn warns others may not be as successful.

"I think it is inevitable that we are going to go too far with this once again," Konyn added.  "If you look at the pipeline it's over a $100 billion for the region, 70 percent of that is Hong Kong and China. So inevitably, it's going to overshoot, too many issues, and those towards the end and those of low quality are going to underperform."

The price of IRC shares sank more than 8 percent on their first trading day Thursday.

Hong Kong has long been a gateway for mainland Chinese companies to access international capital and recognition. Chinese companies accounted for the majority of new listings on the stock exchange this year.

AIA shares will begin trading October 29.

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