From: ft.com
By Geoff Dyer in Shanghai

The Shanghai stock market is to host another big initial public offering after Shenhua Energy, the country’s largest coal miner, revealed plans on Tuesday to raise about $6bn through a mainland listing.

The planned flotation is likely to be one of the biggest in the world this year and will be close to the record for the Shanghai exchange, which has experienced a flood of new equity-raising in the past year.

News of Shenhua’s plans to sell up to 1.8bn shares in the Shanghai market later this year, as well as buying some assets from its parent group, lifted its Hong Kong-listed shares 5.5 per cent.

At Friday’s closing price of HK$27.30 – the last trading day before the offer was announced – Shenhua could raise as much as $6.3bn from the listing, which would put it ahead of last year’s $6.1bn offering from Industrial and Commercial Bank of China.

Shenhua is the latest in a series of big Chinese companies already listed in Hong Kong to announce plans to sell shares on the mainland. Last month, PetroChina said it would raise about $6bn with a mainland listing. China Construction Bank also plans to sell shares in Shanghai this year.

The government is also putting in place rules to allow Chinese companies incorporated overseas to list in Shanghai and Shenzhen. The move would allow China Mobile to go ahead with plans for a multi-billion-dollar mainland listing.

The authorities have been encouraging better known companies to list in Shanghai, in a bid to improve the quality of a market that used to be dominated by middling state-owned companies and to damp the speculative fervour that the market witnessed earlier this year.

The listing will allow Shenhua to invest more heavily in coal, power and transport as well as acquire mining assets in China and overseas markets such as Indonesia and Australia. Shenhua said on Tuesday it would acquire control of Shendong Coal and Shendong Power from its parent for Rmb3.3bn ($435m).

Feng Zhang, an analyst at JPMorgan, said the share issue, if successful, would put the company in a net cash position and enhance its ability to invest in its assets and in acquisitions.

Copyright Fund China 2009.

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