Primary Market

Note 2

1. Hongkong primary market never closes, but the shanghai and Shenzhen sometimes may close the IPO market

2. Shanghai and Shenzhen: the company can only put fraction of amount to apply for IPO shares. Advantage: easy to go IPO. Disadvantage: inflate the subscription demand. But in hongkong, you have to pay the full amount to go IPO. The payment for application is locked for one week, and the interest goes to the listing company.

In hongkong, there’s no price restrictions on the first day of trading, but in China, there is 44% restrictions.

3. We can’t mix the A shares with the H shares, we can't buy it in A, and sell it in H. shares are not fungiable.

4. American depository shares: easy for USA investors to trade, they can buy foreign stocks. The Chinese companies will be listed in American depository shares in USA.

Only fraction of the h listed company has also A listed in china.

5. IPO:1) retail trench (minimum 10%) – hongkong offer component (small individual investors) 2) international placing trench (90%) (primarily offshore: japan, us, Europe) normally, you can only be allowed to be in on side. –book-built process

-if you are retail trench, you submit your application, and if you are lucky, you can get the shares.

-International placing trench: talking to the investment banks that are selling, and negotiating with them to get the shares. There is no formal contract.

-Cornerstone investors: comes from the international placing trench: have contract agreed to buy the USD amount of shares. Must be disclosed. (if have no contract, there is risks that the shares will be squeezed if the demand is large) the cornerstone investors will be locked in for 12 months. (don’t like it: large allocation, squeezed the shares for the others. Good thing: there is lot certificate in this IPO, and this gives the investor confidence.) there is refund for the cornerstone investors, because they declare contain dollar amount shares.

-The final price for retail and international placing are the same. The only difference is the amount acquired (allocation).

-the final price is between some range, all the investors must agree with the maximum price, if the final price is below the maximum, you will get some refund.

For PICC: the minimum price is 3.42, the maximum is 4.03. (the investment bank determines the price, they will find a middle price which makes both the investor and issuer happy; the more uncertainty of the price, the larger range)

-Note that for PICC, the retail trench is only 5%, which is below