INVESTMENT banks are encouraging Chinese companies to meet their equity funding needs by selling shares to small groups of investors, as they seek ways to recoup fees lost due to a suspension of initial public offerings (IPOs) since July.

    In September alone, Huadian Power International and Everbright Securities Co. have raised US$2.4 billion through this route.

    And financial services firm Shenwan Hongyuan Group, battery maker Fengfan Co. and coal company Wintime Energy Co. are planning to raise nearly US$7 billion in similar deals in coming months, regulatory filings this month show.

    “The company wins, with longer term shareholders that want slightly more concentrated positions through a club deal,” as the private share sales are also called, said a Hong Kong investment banker, who did not want to be identified.

    Though fees on private share sales are lower than those for IPOs, fewer banks are involved in arranging such deals than IPOs, making them profitable for banks. Big asset managers and pension funds typically participate in such deals.

    China has been the biggest Asia-Pacific IPO market in recent years after the government lifted an earlier clampdown on new listings and as companies needed capital to support their rapid growth.

    Investment banks were hopeful of robust equity capital market (ECM) fees in 2015 from the Asia-Pacific region, where IPOs jumped 15 percent through mid-September from the year-earlier period to US$45 billion and looked poised to end the year near a record level.

    But those expectations were dashed when China’s stocks bull run suddenly reversed course in June, casting a pall on Asia-Pacific IPOs as a whole. So far in September, only US$231 million worth of new listings have been launched in the region.

    State-owned bad debt manager China Huarong Asset Management and snack maker Dali Foods Group late last month won approval for their Hong Kong IPOs, slated to raise up to US$4.5 billion in total. But instead of marketing the deal straight away, they have decided to wait for better market conditions, bankers said.

    The same holds true for China Reinsurance and China International Capital Corp., which will only market their US$3 billion of deals next month.

    (SD-Agencies)