Top Biz News

Tai-I to fuel its mainland expansion via HK IPO

By Hui Ching-hoo and Zhang Jin (China Daily)
Updated: 2006-12-21 15:12

Tai-I International Holdings is expected to raise US$30 million through a Hong Kong initial public offering (IPO) next month, the latest Taiwan-invested manufacturer to fuel its mainland expansion via Hong Kong's equity market.

The copper and electronic magnetic wire producer will sell its shares to the public from next Thursday to January 3 and begin trading them on January 11, market sources said.

By doing so, it would be the first listing for 2007 in Hong Kong, they said.

The proceeds from the deal will mainly be used to expand the company's output capacity by reinforcing its plants in the Pearl River Delta and acquiring rivals in central and east China, said Jack Lin, its executive director.

Tai-I produced 50,000 tons of wire in the first half of the year, compared with 40,000 tons for the whole of 2005, thanks to strong demand in the mainland's economy.

The company joins a string of Taiwan enterprises that have raised funds in Hong Kong to fuel their mainland development.

These companies are doing so to "meet the financial needs and bypass the Taiwanese Authority's restrictions on further business expansion on the mainland," said an analyst with Hong Kong-based Polaris Securities, which has a Taiwan background.

"The Taiwanese Authority only allows (Taiwan-listed) companies to invest 40 per cent of their capitalization on the mainland," said the analyst on condition of anonymity. "As a consequence of that, Hong Kong seems to provide them an alternative platform to seek further funds."

Hong Kong is technically the best available financial hub for such companies.

"Owing to the domestic political pressure in Taiwan and a lower listing fee, as low as half of that of NASDAQ, it comes as no surprise that the Hong Kong bourse has become their preferred destination," he said.

Currently, there are about 40 Taiwan companies trading in Hong Kong, accounting for 4 per cent of market capitalization. Most of them are electronic and technology firms.

Foxconn is one of the outstanding players. The electronic manufacturer made its IPO at the beginning of 2005. Its share price grew more than six times from its offering price. The company was also included in the benchmark Hang Seng Index in the third quarter.

The number of Hong Kong-listed Taiwan companies is expected to rise to 55 by the end of 2007, according to a report by Polaris Securities.