It has been an incredible year for the Chinese IPO market with over $US90b raised this year through IPOs in Hong Kong and the mainland.

Compare this to the United States where they’ll struggle to crack $US60b this year having raised just over $US50b in 2006.

Instant fortunes have been made in names such as, however last week it looked like the wheels were finally falling off the IPO market with Sinotruk, China’s leading heavy truck manufacturer, falling 15 percent on its first day of trading in Hong Kong.

Well, clearly last week was a simple case of indigestion as yesterday, China Railway Group traded as high as 67% above its issue price. China Railway Group is the publicly traded unit of China Railway Engineering Corporation, which is the world’s third-largest construction company.

If you think that there has to be a pause in this avalanche of Chinese equity raising then think again. Investment Bankers in China at the moment would create the 28 hour day if they could, such is the deal flow.

In the next few months expect to see billions more raised in Hong Kong and the mainland. For example Stanley Ho’s casino company Sociedad de Jogos de Macau is expected to raise around US$1b in January and there is growing speculation that China Shenhua Energy, the world’s second-largest coal company, could be looking at raising an enormous amount of equity to go on an asset-buying binge.

Given concerns in other western democracies about the growing power of sovereign funds and majority-state owned companies, will have some significant economic, political and social ramifications in Australia. Why? Look at what Chinese companies are interested in – financial and resource companies. Strip out News Corporation and that is basically the stock market in Australia.

One has to hope Kevin Rudd is making mandarin lessons mandatory at the Foreign Investment Review Board.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey