China South Locomotive & Rolling Stock Corp Ltd, the country's biggest train maker, has won approval from the Hong Kong Stock Exchange for an IPO, which, combined with one in Shanghai, is expected to raise $2bn, a source close to the deal said on Monday.
Beijing-based South Locomotive, which also makes railway equipment, plans to sell up to two billion shares in a Hong Kong initial public offering and launch its Hong Kong IPO pre-marketing this week, said the source, who was not authorised to speak to the media. It targets a listing in early August.
The company has not yet started investor education for its planned A-share listing in Shanghai.
"The domestic A shares will list before Hong Kong's H shares, even if the Hong Kong portion starts its pre-marketing first," the source said.
The company has announced plans to issue up to three billion domestic A shares, or about 30% of its enlarged share capital, to raise about CNY8.97bn ($1.3bn) in the Shanghai offering.
Last month, China Securities Regulatory Commission (CSRC) approved South Locomotive's A-share offering, but the company has yet to indicate when the IPO will be launched amid concern over a slack domestic stock market.
A $6bn IPO by China State Construction Engineering Corp, which was approved in early June and set to be China's biggest so far this year, has already been delayed for more than a month due to weak market sentiment.
China's benchmark Shanghai composite Index has fallen 23% since the start of May, weighed down by lingering worries about high inflation and official monetary tightening. Hong Kong's benchmark Hang Seng Index has dropped 14% over the same period.
Shares in the Hong Kong offering should be priced above those in the A-share sale, the company said in its preliminary prospectus filed with the CSRC.
The H-share offering is being sponsored by Macquarie Bank and China International Capital Corp.
The company will use the proceeds to upgrade technology, expand capacity, build factories and make acquisitions overseas.
By Kennix Chim, Reuters
