Chinese Entertainment Industry Set for IPO Boom Year

 

Chinese government efforts to boost the entertainment industry, as part of a broader push to promote culture, are expected to translate into a boom year for stock market listings in the sector, research shows.

The Third Plenary Session of the Communist Party, which outlined key economic reforms, highlighted in November the culture industry as one that it was keen to promote, and that decision means more stock market listings for Chinese companies in 2014, according to research by Beijing-based Entgroup, which analyzes the entertainment industry.

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The culture industry -- film, television, literature, art, music, fashion, gaming and the like -- is crucial to Chinese efforts to promote "soft power," as China tries to match its growing economic might with cultural and political influence around the globe.

According to stock market data compiled by Entgroup, as of Jan. 2, 2014 a total of 47 cultural enterprises have carried out IPOs.

Last year, a total of 30 cultural industry companies had applied for IPOs, and a total of 10 cultural enterprises listed overseas, including four in Hong Kong and six in the United States.

"2014 will usher in a boom in cultural enterprises listing on domestic and overseas stock markets, with the emergence of star Chinese companies, said Liu Deliang, of Tsinghua University’s new economy and new industries’ research unit.

Last year, China’s box office takings were $3.6 billion, which is around one third of the North American total in the same period. Chinese box office revenues in February were higher than in all of 2006.

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Some of China’s top private film companies, such as Bona and Huayi Brothers, have gone for stock listings.

Huayi Brothers raised $93.7 million listing on the Shenzhen board in late 2009, and in 2010, Bona listed on the U.S. Nasdaq.

In December, Bona listed on the NASDAQ Golden Dragon China Index, which gives the production and distribution company access to China securities while providing the transparency offered with U.S.-listed stocks.

The market is really looking out for a long-delayed initial public offering (IPO) for a part of the state film colossus, China Film Group.

The CFG listing has been "imminent" for around five years now, but an underwhelming market and other logistical issues have consistently delayed the move.

The government, however, is keen for the big state companies to raise funds on the stock market so they can better compete with private companies, and increasingly with overseas firms.

Liu said the banks, insurance companies, securities firms and trust industry would come up with new policies and instruments to promote the development and integrate with the culture industry.

Analysts forecast that 2013’s wave of mergers and acquisitions in the sector would continue.

They also anticipate greater diversification in China's culture industries, including film, TV, broadcasting, publication, animation and games outfits developing into richer niche markets simultaneously.

The State Council, China’s cabinet, has been working on a government plan to promote creativity and relevant industries and is expected to launch in the near future.

“Culture forms are undergoing rapid change, especially with the Internet and people accessing cultural information online, and companies need to pay attention to consumer habits and explore new forms of industry,” said Chen Shaofeng, deputy head of the culture industry research institute of Peking University.

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