https://www.ft.com/content/6a87d390-fdad-43c7-8ff9-c99f3b94294c
SMIC scores mainland China’s biggest listing in a decade
Shares in chipmaker pop 246% after Beijing pushes investors to back drive to become self-sufficient.
Shares in SMIC popped 246 per cent in the first day of trading, as the Chinese chipmaker entered the ranks of country’s most valuable publicly listed companies following a secondary listing in Shanghai.
SMIC, a company at the heart of Beijing’s drive to become more self-sufficient in chipmaking, had already raised Rmb53.2bn ($7.6bn) in share sales ahead of the listing, the most of any mainland Chinese offering in a decade.
Shares began trading at Rmb95, up sharply from the offer price of Rmb27.46, and closed at Rmb82.92.
Half of its shares were initially sold to 4.3m retail investors. But even more were clamouring to get in when trading opened.
The listing attracted a wide range of retail investors such as Zhou Ziqing, a 27-year-old who works in the PR department of a law firm and put aside Rmb100,000 ($14,310) to buy shares. “I was born ready for this day,” she said.
Ms Zhou was confident that SMIC, as one of China’s national champions, would be a safe bet. “SMIC is China’s best chipmaker and the industry enjoys a lot of policy support,” she noted, adding she would hang on to at least half the shares she plans to buy for the long term.
A senior official at the Shanghai stock exchange noted that the government plans to use its domestic capital markets to raise money towards China’s goal of technological self-sufficiency. “SMIC is benefiting from US-China tensions,” the official said, adding: “We hope to compete with Nasdaq for Chinese tech companies.”
As well as China’s government funds, Singapore’s sovereign wealth fund and the Abu Dhabi Investment Authority are among the institutions backing the IPO.
SMIC’s first week of trading is likely to be dramatic. The Shanghai Star board is the only exchange on the mainland with no limit on stock price movements in the first five days, after which there is a 20 per cent up-or-down limit, compared to 10 per cent elsewhere.
The company acknowledges that it is charging a high price, compared to its peers. At its target price of Rmb27.46, SMIC’s valuation was 113 times last year’s earnings. By the company’s own reckoning, that is at least four times higher than its domestic rivals. TSMC, the Taiwanese industry leader, trades at 27 times earnings.