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September 25, 2007

China Shenhua Energy Draws $350 Billion in IPO

posted by MR WAVETHEORY at 9/25/2007 06:30:00 PM
China Shenhua Energy is setting two records when it goes public in Shanghai. It drew $350 billion in IPO orders. Also, it will be the largest IPO worldwide this year. The company is a coal producer in China.

Shenhua, listed in Hong Kong since October 2005, may raise as much as 66.6 billion yuan in the world's biggest share sale this year. The last six companies to hold mainland initial public offerings have jumped an average 250 percent on their first day of trade.

Shenhua shares have more than doubled in Hong Kong since Jan. 1, outpacing the 32 percent gain in the benchmark Hang Seng index and making it the third-best performer this year among the 40 members of the MSCI AC Asia Pacific Energy Index.

I have been seeking a reason for the huge rise in China commodity stocks over the past week. The huge demand for Shenhua Energy partially explains the rise in China Resources (Nasdaq CHNR) which has gained more than 50% in the past week on Nasdaq. It could also explain the big gains for China related energy stocks like China Sunergy (Nasdaq CSUN), Trina Solar (NYSE TSL) and Yingli Solar (Nasdaq YGE) as well as stocks like China Automotive (Nasdaq CAAS), China Precision Steel (Nasdaq CPSL) and China Technology (Nasdaq CTDC).

Shenhua is the second largest coal company in the world, second only to Peabody Energy (NYSE BTU). A potential China play for US investors is Yanzhou Coal Mining Co. (NYSE YZC). YZC is up about 15 points in the past week, at around $105. It's a large cap ADR. Yanzhou Coal is an ADR of the Hong Kong listed shares. The ADR ratio is 1:50 with the HK shares ticker 1171.HK. The HK shares trade at 16.26. With $1 = 7.76 HKD, you have a price of $104.76 per US ADR.

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