Asian Bank of the Year, China Equity House: CICC

IFR Asia Awards 2020
8 min read
Thomas Blott

Pioneer spirit

China led the global recovery from the Covid-19 crisis in 2020, and one bank played a crucial role in opening the capital markets to the country’s new economy champions. For pushing the boundaries, CICC is IFR Asia’s Asian Bank and China Equity House of the Year .

China International Capital Corp added to its reputation as China’s premier investment bank in 2020, playing a key part in introducing new capital raising concepts to the domestic market and narrowing the gap between onshore and offshore markets.

CICC’s international expertise and its work cultivating relationships with innovative and private sector companies paid dividends in a year when the Covid-19 crisis accelerated the transformation of China’s capital markets.

Having made its name bringing state giants such as China Mobile and PetroChina to the global markets in the late 1990s, CICC put its pioneering spirit to work for a new breed of industry champions in 2020. Its work on a wave of groundbreaking equity offerings rewrote the script for China’s technology sector, reduced its exposure to an increasingly hostile US market and elevated both Shanghai and Hong Kong’s status as global financial centres.

CICC had an outstanding year by any measure. It outmuscled the likes of Goldman Sachs and Morgan Stanley in terms of overall investment banking fees in Asia, moving up four places to third in IFR Asia’s review period from November 16 2019 to December 31 2020.

It was on track to grow its bottom line for 2020 by 61%–71%, according to stock exchange filings, having reported a 54% gain in pre-tax profit to Rmb6.14bn (US$951m) for the first nine months of the year with investment banking revenues up by more than two thirds.

Its stellar performance was driven by a strong showing in ECM, where it raised US$26.26bn from 133 deals during the review period, double its total for the previous IFR awards period. It helped raise US$3.5bn on the Shanghai Stock Exchange’s Nasdaq-style Star Market, narrowly missing out to far larger Citic Securities for the top slot.

Its success last year was no accident. China’s oldest investment bank has worked hard to pivot its own focus towards private sector companies embodying the country’s new economy.

“It’s easy to say we were fortunate last year but we made a solid bet several years ago that a lot of the growth, not just in Asia but globally, would come from a growing number of new economy companies in China and that strategy is beginning to bear fruit,” said Cong Hui, head of capital markets.

New credentials

CICC began life as a Sino-foreign joint venture in 1995 with Morgan Stanley and China Construction Bank its biggest shareholders. Its early successes included the US$4.2bn landmark overseas listing of China Mobile in 1997 and US$2.9bn PetroChina IPO in 2000, followed by mega-floats from Chinese state banks.

As the number of milestone public-sector deals dried up, CICC reinvented itself as a leading adviser to new economy champions.

Back in 2015, it set up a growth investment banking team to deepen its coverage of early-stage, new economy companies. It has also skilled up in key sectors: it is one of the few investment banks with a dedicated semiconductor team.

The acquisition of China Investment Securities, completed in 2017, has also added to its market penetration. CISC’s sprawling retail network gave the firm offices in many second-tier and third-tier cities, away from its earlier heavy concentration in Beijing, Shanghai and Shenzhen.

CICC capped its achievements with its own Rmb13.2bn A-share listing in 2020 that underlined the power of its brand: the stock debuted on November 2 and gained 162% by the end of the year.

“This has definitely been a multi-year effort to try to grow our ties with new economy companies,” said Barry Chan, head of investment banking for Hong Kong. “We formed the growth investment banking team many years ago and looking at the transactions that we completed last year, a number of those clients started as growth investment banking clients.”

Stellar performance

CICC’s leading role in supporting China’s new economy was best illustrated last year by its track record on the Star Board. As sponsor of several landmark deals, it helped introduce reforms that have made the exchange a viable alternative for technology companies, allowing a broader range of issuers to access capital and reducing long regulatory delays.

“One of the things that distinguishes CICC from a lot of the other Chinese securities firms is our strong international presence,” said Xu Jia, head of international investment banking. “A lot of the innovations we saw last year in the Star Market we have experienced in overseas markets, so we are able to advise the regulators and work closely with the issuers on these landmark transactions.”

Chipmaker Semiconductor Manufacturing International Corp’s Rmb53.2bn (US$8.22bn) Star listing is a case in point. As well as being the largest A-share offering since Agricultural Bank of China’s Rmb68.5bn Shanghai IPO in 2010 and the largest so far on the Star Board, the deal also set records for its speed of execution.

The China Securities Regulatory Commission granted approval just 29 days after SMIC’s first IPO filing, the quickest application process in the history of China’s capital markets. The deal also raised more than double its original target and the shares more than trebled in value on their debut.

Other major Star Board mandates included the Rmb1.94bn IPO of Ucloud Technology, the first A-share listing from a company with weighted voting rights; China Resources Microelectronics’ Rmb4.31bn listing, the first domestic listing with a red-chip structure; and Suzhou Zelgen Biopharmaceuticals’ Rmb2.03bn float, the first A-share IPO of a loss-making company.

In a more traditional sector, CICC also advised on the Rmb32.7bn listing of Postal Savings Bank of China in Shanghai, which marked the first time a greenshoe was used for an A-share IPO in nearly 10 years. The arrangement helped stabilise PSBC’s aftermarket performance after a few other recently listed Chinese banks had traded below water.

Offshore experience

Outside of China, CICC also had a better year than most of its rivals as the groundwork laid in previous years paid off. CICC led its peers in the Hong Kong equity market and advised on eight out of the 10 secondary listings during IFR’s review period, notably as co-sponsor of Alibaba Group Holding’s HK$101bn debut at the end of 2019.

It was also sponsor on Nongfu Spring’s hugely popular HK$9.5bn IPO in September, which attracted HK$670.8bn of subscriptions from retail investors – a record at the time. The stellar trading debut of the shares, which popped 54%, was one of the drivers of the red-hot Hong Kong IPO market in the last few months of 2020.

CICC was also a pioneer in the issuance of global depositary receipts, advising on all three listings last year under the Shanghai-London Stock Connect trading link – China Pacific Insurance Co’s US$1.97bn deal, China Yangtze Power’s US$1.96bn offering and SDIC Power’s US$220.68m issue. It was also active in China-to-US listings, advising on all three of Nio’s follow-on offerings last year.

In debt capital markets, CICC helped pioneer new concepts, including Bank of Communications’ US$2.8bn Additional Tier 1 capital raising, the first offshore issue by a Chinese bank structured as a perpetual bond, and the US dollar tranche of Bank of China’s US$942m-equivalent dual-currency blue bonds, Asia’s first public offering of a sustainability instrument with a focus on ocean health.

It also won repeat business when it worked on the €4bn (US$4.9bn) and US$6bn senior bond offerings from China’s Ministry of Finance, the fourth consecutive year that CICC has acted as lead manager and bookrunner on a Chinese international sovereign bond.

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