BOE completes 12b yuan share placement

Investors usually shun loss making companies but BOE Technology Group seems to be an exception to that rule.

The country’s largest LCD panel maker, which has only managed to post an annual profit once in the past four years, has successfully completed a 12-billion-yuan share placement to select investors, the biggest equity fund-raising effort in 17 months.

Nine institutional investors, including Haitong Securities and Southwest Securities, and one individual, Ke Xiping, who is the chairman of Xiamen Hengxing Industrial Co, subscribed to the shares, according to a stock exchange filing from the Beijing-based company.

BOE said the capital raised would be used to expand its liquid-crystal-display (LCD) production capacity, mainly the on-going TFT-LCD production line project in Hefei in central China’s Anhui Province, which is set to begin operations by 2010.
BOE Technology is likely to turn into the world’s third largest LCD panel provider once the new assembly line becomes fully operational.

According to BOE Technology, the shares were sold at 2.4 yuan each. On Wednesday, BOE’s share price surged by 28 percent, creating a huge return on investment for the company’s new investors.

Though criticized by many of BOE’s small shareholders, many analysts believe the deal is a sign that liquidity is abundant in the stock market.

The Shanghai stock market index jumped about 50 percent after the government announced its 4-trillion-yuan economic stimulus plan and on the back of record bank lending.

Some market watchers are worried that some of the new bank lending, which totaled more than 5 trillion yuan in the first five months of this year, will go to the stock and real estate market instead of being channeled into the real economy.

The new investment by BOE Technology, whose major shareholders are state-owned enterprises in Beijing, Hefei and Chengdu, is expected to give a shot in the arm to the local economy.

Besides the Hefei production line, BOE Technology is also planning to establish an China electronics LCD production line in Beijing next year, which needs an investment of about 30 billion yuan.

Impacted by the economic slowdown, most of the world’s major LCD panel makers recorded huge losses due to weak demand for electronic products.

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