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A foot in the door

When it comes to floating state-owned enterprises, the Chinese authorities have learnt fast. More discriminating in what they offer to the market, they have also recognized that pricing is crucial and that investors are attracted by big issues because of the liquidity they provide. For their part, western banks leading issues have learnt - sometimes the hard way - that the Chinese are increasingly choosy about who they work with. That doesn't make bankers any the less determined to establish a presence in a massive market that is at last beginning to restructure.

Nicholas Andrews

It has been a record year for equity and equity-linked issuance in the Asia ex-Japan market. By November it was clear that the $38 billion record set in 1999 was going to be broken by about $2 billion. "That's another $1 billion in equity capital market fees," says one banker grinning and rubbing his hands.

With Hong Kong and China responsible for 70% of the new issuance, issuers from these two markets are picking up most of the tab.

The foreign banks may be happy but the news for their investing clients and many issuers is a little less rosy. Being smug when the price of your stock has disappeared beneath the waves is something of a challenge.

"Nearly all deals have been performing badly, and most IPOs are underwater," says Nicholas Andrews, managing director and head of equity capital markets at CSFB in Hong Kong.

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